Bitcoin frenzy

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Saturday, December 28, 2013

WHILE consumers have been trying to decide between Apple and Samsung products in their wish list (since its past Christmas, by now they should have bought one), big time investors and speculators are getting into the frenzy called “Bitcoin.”

Bitcoin is defined as “a peer-to-peer payment network and digital currency based on an open source protocol, which makes use of a public transaction log.”

In simple terms, it is like electronic money that has started to receive legitimacy as some companies, including WordPress, and Virgin Galactic, have accepted these as payment for transactions even as high-profile investors such as Richard Branson and the Winklevoss twins have given the e-currency mainstream media coverage. (The Winklevoss twins sued Mark Zuckerberg for $140 million, claiming he stole their ConnectU idea to create the popular social networking site Facebook) Asia’s richest man Li Ka-shing on the other hand has bought in to the firms providing the services that bitcoin holders use.

One economist has called bitcoin a “pseudo currency,” while Hong Kong’s secretary for Financial Services said that “(it) is not an electronic currency, nor is it an e-wallet. Its price is highly unstable. It is not qualified to be used as an electronic currency. Citizens should beware of it.”

The frenzy about bitcoin happened in November this year, when it was trading at about $615, and in a week’s time passed $1,000, pushing its market capitalization to over $11 billion. The New York Times commented, “Not bad for a something that came out of thin air.”

It is likely that speculators are raising their stakes in this pseudo-currency which has been identified as a channel for money laundering and drug traffickers.

Central banks are wary of bitcoin. Unlike real currencies backed by governments, it is neither tied to any specific country nor does it have an entity guaranteeing it.

Even its origin remains a mystery.

It is said that it was first introduced in 2009 by developer Satoshi Nakamoto, which is either an entity or a person and remains unknown. This is what makes governments wary of this cryptocurrency. Nobody is accountable, and if the system fails nobody has to answer.

While the idea of bitcoin comes from science fiction, it is a concept that must eventually be adopted by governments. However, bitcoins cannot simply be placed in the hands of invisible operators or be allowed to be manipulated by capitalist wolves or even criminal syndicates.

Governments and legitimate money institutions must override the system, if only to protect the public from being engulfed into a monetary black hole.

Published in the Sun.Star Cebu newspaper on December 28, 2013.


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