The Bitcoin Is Dying. Whatever.

There's no denying the rise of Bitcoin has been as amusing as it has been interesting. A quasi-anonymous, internet-spawned currency that shoots up to a price of $US32 is captivating. But the honeymoon is over and Bitcoin is falling. Fast.

After tumbling to a price of $US7, the Atlantic's Nicholas Jackson points out the biggest problem with Bitcoin: it's founded upon nothing. Absolutely nothing.

The problem with Bitcoins is the same thing that people love about Bitcoins: They leave no trace. It takes an incredible amount of computing power to create new Bitcoins with a PC (you can also, of course, just buy them on an exchange, which is what most people using them do). And a complicated algorithm keeps the total supply steady. Once these digital coins are created, they're still just a handful of bits and bytes, a little piece of encrypted code. There is no fundamental value.

Some will argue in favour of Bitcoin because the basic concept of currency is relative and arbitrary. But even so, most prominent forms of currency are backed by some form of insurance. That might come in the form of something like gold, or a government institution, like the FDIC.

Bitcoin lacks this. Bitcoin's keepers argue that gold is also relative and arbitrary. But gold has been an object of value for thousands of years. It's spanned entire generations. I'm fairly certain your great-grandparents or great-grandchildren won't find any inherent value in a digital file. And the pro-Bitcoin masses argue that a centralized currency means that you have less control over your money. But, if Bitcoin bottoms out, you're left with nothing.

That's not to say that Bitcoin doesn't have value as an experiment. Maybe the currency of the future need not be backed by a government body at all. But it sure as hell better have better safeguards implemented into its core framework.

So Bitcoin, we'll remember the good times, like the time that one guy who got heat stroke while mining Bitcoins. Or the time there was the great heist caper that shut down trading site Mt Gox for an entire day. The lulz were abundant. But frankly, it's time for you to go. Farewell. [BitCoin Charts via The Atlantic]


Comments

    I just checked my Bitcoins. They're still there. So is the blockchain, and transactions seem to be going through just fine.

    The valuation of a Bitcoin is interesting, but not massively relevant to the functioning of the tool.

    Value will rise and fall again, and so long as you're working for your Bitcoins (and peg your prices to the currency you regularly use) rather than trying to get rich off the backs of others, the valuation can be reduced to an irrelevancy.

    longer term view http://bitcoincharts.com/charts/mtgoxUSD#rg60zig15-minzczsg2010-12-31zeg2011-08-05ztgCzm1g10zm2g25zi1gMACD
    I think it's demise is a little early to predict. It will most likely be killed by intervention from global regulators because of its use in money laundering, not because it is not "backed".

      +1

      Although I'd really like it to not fail.

    The value of bitcoin has increased by 32% today - you should write articles like this more often.

    Today bitcoins trade at approx $11.50USD ea and appear to be rising further.

    Why are so many journalists desperate to declare bitcoins dead based on a price dip?

    We don't declare the credit card dead after every major hacking incident. (and there are many!)
    Better safeguards into it's core framework??? Bitcoin itself was never hacked and is no more likely to be hacked than the encryption everyone relies on day to day to secure their banking transactions. Cryptography is good enough for banking and for military personnel entrust their lives to - it's good enough for bitcoin. Even massive advances in computer power are no threat to serious crypto maths.

    There will be further peaks and troughs no doubt.. but the system itself remains solid, and there is massive ongoing development of services and merchant infrastructure by many startups and individuals.
    Bitcoin is rightly valued for it's unique characteristics and community momentum that together make it an increasingly useful tool in commerce.

    Thanks for the publicity gizmodo.com.au :D
    I am a member of the organizing committee for Bitcoin AU 2011 coming to Melbourne in November and run the only Australian based Bitcoin mining pool http://ozco.in Bitcoin in Australia needs publicity - thanks for you help :D

    sorry for double posting but I just had to mention http://spendbitcoins.com/bpay.php I can now pay for the electricity I use mining Bitcoins with Bitcoins. An awesome initiative by another aussie that thinks Bitcoin is alvie :)

    It's now Feb 2012 and bitcoins still around, the network is there humming along, the rate is lower than last year.

    Well Bitcoin isn't quite dead anymore... ~$5 trading rate, and the volumes on the exchanges have been good!

    Also in Melbourne, we are having our first meet-up. Not something that you do when your community is dead: https://www.facebook.com/events/345430765511234/

    Ha. 2013. Price is over $1000. Bitcoin's alive and well. These kind of posts shouldn't be on the internet.

    HAHAHAHAHA

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