While the loftier dreams of science fiction are still irritatingly unrealized — we’ll all probably shuffle off our mortal coils without having ever known the benefits of jetpacks and hoverboards, alas — there’s at least one thing about our world circa 2013 that is brave and new, and that is Bitcoin. It’s gotten a lot of press over the past few months, migrating from the dark recesses of Reddit to the pages of the New York Times. Even the Government Accountability Office has taken note, issuing a report saying that income from Bitcoin transactions may be taxable. Bitcoin’s apologists claim it will change the way we think about money forever. Its critics claim it’s super-lame and will probably be worthless within a few years. Regardless of its future prospects, at least two congressmen, Justin Amash (R., Mich.) and Thomas Massie (R., Ky.), think it’s great. Also, you can use it to buy drugs on the Internet. And, as I recently learned, you can live a vaguely normal life using just Bitcoin (more on that in a second). What a world. But first, we should look at what the heck Bitcoin actually is.
What Bitcoin Is
Before explaining Bitcoin, a quick story. When I was a freshman in college, an astrophysicist visited my school to give a lecture on black holes. He used visual aids, slideshows, and fashionably self-deprecating geek humor to kill an hour telling me and a few hundred other liberal-arts-type undergrads all about the phenomenon. After the lecture wrapped, my friends and I looked around at one other, smiling in admiration and praising the interesting speech, until one girl broke in with a plaintive question:
“But what are they?”
That’s how I feel about Bitcoin. I don’t really know what it is. Justin Malkin (I’ll explain his role later) tells me that it’s not technically a currency but, rather, an Internet protocol. As what must be the sole member of the Millennial generation who didn’t learn to copy and paste until about age 13 or something, I, you should not be surprised to hear, have no idea what an “Internet protocol” is and almost certainly wouldn’t be able to explain it even if I did. So if you harbor any hopes about finding herein a clear and concise explanation of what Bitcoin, on an ontological level, actually “is,” you’re going to be pretty bummed out.
That said, here’s my “‘Bitcoin for Dummies’ for Dummies” version.
Bitcoin is an Internet-based currency that has never had any corresponding real-world guarantor of value. While dollars are created by printing presses, Bitcoins come into existence (or are “mined,” to use their users’ term) by a complex computer program written by an anonymous programmer. Users download the code, which is open-source (I don’t know what that means; google it, I guess) and available to anyone, and run it on their servers. It solves complex math problems and rewards users with Bitcoins. There will only ever be 21 million Bitcoins mined, so, theoretically (and that’s a “theoretically” for the record books), it’s inflation-proof. Bitcoin transactions are largely anonymous and (in my experience) a bit simpler than credit-card ones. From what I can tell, the main reason Bitcoin has any practical value is the existence of Silk Road, a website that lets users buy drugs and other illegal material online.
Quick Interpolation on Silk Road
The Silk Road website is a libertarian utopia of sorts. It’s the ultimate instantiation of free-market principles — a lawless, association-free Wild West that, despite the narc-ish efforts of Senator Chuck Schumer (D., N.Y.), lets users get whatever gives them their jollies without the pesky inconveniences of, say, finding a drug dealer, or having friends who can hook you up, or tracking down a grow light so you can do some at-home agriculture in your closet. I need to add here, for my parents’ sake, that I have never purchased anything from Silk Road, narcotics or otherwise. But my friend who has says that it’s a bit more expensive than traditional procurement methods. But hey, that’s the free market, and if you prefer to get your oxy in the mail and encased in discreet packaging instead of from a less-than-savory purveyor, the magic of capitalism has made that possible.