Is Bitcoin becoming too successful?

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May 14, 2013 – Everybody speaks about Bitcoin, the virtual currency that has experienced enormous success worldwide. This money is based on the principle of shortage like any precious metal. The amount of bitcoins is defined by their principle of creation or ‘mining’ as it is called. Computer must perform certain algorithmical operations in order to mine a new bitcoin and by mathematical principle there cannot be more bitcoins than around 21 million.

In January one bitcoin was worth around $15, while on April 10 the currency reached a peak of $266 – dropping immediately after to $105. The currency regained again, however, explanations for this up and down vary. Some say the Cyprus crisis and the economic crisis in general are responsible of what has happened. Indeed, bitcoins are so requested that cyber-thieves even run so-called Trojan horses, kind of viruses spread through Skype, which force infected computers to ‘mine’ for someone else.

The volatile value of Bitcoin is one point often criticised considering that this project sees itself not only as a geek hobby but as a virtual currency to be used in daily life. As we reported in January, Bitcoin was approved as a registered payment service provider (PSP) under European Law.
Another point, however, seems to be more problematic in the eyes of the authorities. Bitcoin is a decentralised peer-to-peer-based currency which means that there is no central issuing authority. It appears that many states, comprising the USA, feel threatened by this form of alternative money which seems to question the states’ monopoly on issuing money. Currently the Comodity Futures Trading Commission, a US agency that regulates the futures and option markets, considers regulating Bitcoin.

But, as some analysts put it, Bitcoin’s importance may not be whether it will establish itself as an alternative currency or to what degree its value will remain stable. Its real importance is having created a new way of imagining money and how to create it. Like Napster, a peer-to-peer network for exchanging music online that has been banned some years ago, Bitcoin has already found its rivals and maybe its successors. Other cryptographic currencies have been created and it seems that this kind of money may become increasingly relevant with virtual payment systems advancing.

About Bitcoin and what it may represent for thinking currency you can read this Economist article and this one in The Guardian.

Here you can find some information about the Trojan horse that mined Bitcoins illegally.

Business Insider reported on the CFTC considering taking steps against Bitcoin.

And Technology Review lists and explains more Bitcoin offshoots.

This is the official Bitcoin website.

And about electronic payment systems and related subjects you can find many articles in our MintWorld section on ‘Cash and its future.