Kevin Whelan’s article, “How is Bitcoin Different from the Dollar” [Forbes, November 19, 2013] briefly examines the validity of the concept of virtual currencies developed and controlled by the private sector without government involvement. In the short time since Whelan’s article appeared, news reports appeared that the founder of a major Bitcoin exchange, Mark Karpeles, had been forced into bankruptcy following the theft through computer hacking of $400 million worth of Bitcoins. So, that answers that. One of Whelan’s main points is that a currency not backed by a central government is a currency with little real substance to it, making it far more vulnerable to market perturbations and computer fraud – the only venue in which Bitcoin exists. Dollar bills are pieces of paper. Bitcoins are virtual money. Dollar bills, however, represent actual value in terms of the government’s guarantee of what they are worth. Obviously, the value of dollars can plummet drastically when supply overwhelms demand, but they still represent the currency of a legitimate government. Furthermore, Bitcoins are fine for online exchanges in which both parties agree that the virtual currency represents actual value, but the market for such a currency is likely to remain extremely limited. We may not trust our government, but we know where it is. Almost nothing is known about the founder of Bitcoin, beyond a possible alias, Satoshi Nakamoto, which suggests that reliance on a currency the genesis of which is entirely mysterious may not be a good idea.
Another of Whelan’s main points is that, if Bitcoin is successful and does become a major currency of exchange, what makes anybody think that governments won’t get involved in regulating it. Certainly, one or two major crises involving Bitcoin or any other virtual currency would be followed by a public outcry for government intervention and a rush by members of Congress to rectify the problem with a bevy of new laws and regulations – an expansion of government involvement that many in government would applaud.
In short, Whelan’s article suggests that consumers would do well to tread lightly in the new and murky world of virtual currencies. There is no reason to believe such currencies will be inherently more secure or stable than existing government-backed currencies, and the mere fact that they exist solely in cyberspace should serve as a warning to anyone familiar with the practice by cybercriminals of hacking presumably secure systems to undermine networks.
Some might say bitcoin is a dot.com currency and others would say “dot.con” scheme. The Forbes article provides a rationale that bitcoin is a new form of private currency and might be considered as viable (or as iffy) as a national currency. Although forms of barter are seen in the cyberworld and real world, groups typically seek the security of agreed-upon currency values. Among other things, barter can be inherently unfair—as family, friends, and business associates can have unfair advantages far beyond the “among friends” discounts and deals of national-backed currencies. It’s interesting that the Forbes piece actually presents a case in which barter was chosen over metals-backed currency by a nation.
The Forbes piece did not convince me of the viability of bitcoin. The article provides ample examples of reasons people welcome and use a non-national-backed currency, but no in-depth case histories. I have more questions of than hopes for bitcoin. I wonder about the security of the system. Are those most adept at computer coding likely to be able to “game” the system? The Forbes piece speaks of transparency of bitcoin, but does not explain why this would be more than a claim. Just as currency experts might have unfair advantages in the traditional metals-based economies, international computer coders would have at least as much advantage with bitcoin. Considering the cybersecurity and cyber attack outbreaks so much in the news lately, the cautions of the Forbes article are quite wise, in my opinion.
Upon first reading the article, I surmised since the Bitcoin is not backed by any state, it appears unstable and undependable. It would require acceptance from a large population of both consumers and commerce alike in order to be reliable and of any value. Yet, still lacks the necessary exchange value in order to have worth.
The article touches on both the pros and cons of the topic, not necessarily showing bias to either side. In addition, it gives additional sources to further explore and deduce an opinion.
This article approaches the Bitcoin phenomena from a very levelheaded perspective, which proves to bring it to an effective conclusion. Basically, Whelan says that Bitcoin has started out similarly to all other currency, but rarely do things like this last. He gives a good bit of personal advise at the end (be wary of investing too much in it), but still manages to keep the article professional and factual. In all, this article would prove to be of help to anyone looking to invest in Bitcoin.
This article discusses the current bitcoin situation from a historical perspective. Whereas many individuals now debating the merits of bitcoin may be centering arguments based on present-day technology and society, this author references an article that approaches the topic from a historical point of view. He compares the uses of bitcoin to former "inventions" in money to determine a possible future for bitcoins. Referring back to the title "How is Bitcoin Different from the Dollar", the answer most clearly provided in the article is that whereas the dollar is backed and recognized by the government, the bitcoin is not, making its future as a form of currency less certain.