2013 Writing Contest: Future World: How Would You Like to Pay For That?
Second Place Essay
A Little Bit of the Future, through Bitcoins
I logged onto YouTube that day with the usual quiet excitement that carries my hope for a couple new videos in my subscription box. It's the same as always: a Harlem Shake video from kickthepj accompanied by a new video from the PBS Idea Channel entitled "Are Bitcoins and Funny Hats the Future of Currency?" This had my attention.
"The bitcoin isn't regulated, controlled, or anything really, by a central authority like the Federal Reserve, or Uncle Moneybags," Mike Rugnetta said. Bitcoins aren't released by a bitcoin overlord, but instead are "mined" by various computers running applications to generate a predictable number of coins for users to have, If a user chooses, he or she can run a bitcoin mining application on his or her computer, generating more bitcoins for the economy by having the computer solve complex problems. Every time a problem is solved, a new bitcoin is generated (pbsideachannel, 2013). All of a sudden, it's not a government minting currency. It's a computer program. The code is open source to ensure complete transparency. (Pi . , 2011). And every single bitcoin that is legitimately created is transmitted across the entire network and registered on each computer that mines it--an inbuilt security mechanism. Bitcoins have no middlemen; people transfer money directly to each other without the aid of banks and don't use banks at any point. Computers have their own wallets. (weusecoins, 2011). Like the dollar, bitcoins are fiat money--they have no intrinsic value, but an agreed- upon value. One can convert dollars to bitcoins to euros, and bitcoins even have their own monetary symbol - a B with a vertical line down the middle. It's truly a global currency.
I was amazed that the idea of what I had seen as pure idealism before, the bitcoin was what I had seen the world as when I was little, a large community, and one nation. It was a step towards further interconnectivity. Adding the video to my favorites, I picked up my backpack in the vain hope to work through AP biology homework.
The question that I allowed to plague me that day was simple, yet complex: Is the bitcoin a viable currency?
I thought about my future, a future without dollar bills but one hundred bitcoins that I had painstakingly saved up on my hard drive. Logistically speaking, bitcoins would be a nightmare. I tried to imagine linking multiple devices to a mobile wallet and could only see forlorn attempts at reducing the security of my life's savings of bitcoins. Yet I could hardly be expected to lug around my hard drive wherever I went. That is the problem with an intangible currency--it's a credit card, but worse. If I stopped for a moment to put down my hard drive at Starbucks, assuming it was compact enough for me to carry on my person, a thief could swipe it without me even noticing. Even worse, if I were a victim of such blatant theft, what authority would I report it to? The idea of bitcoins is that there are no middlemen, no regulations from actual people, but that implies that the moment my bitcoins are lost, it is my problem, it is my fault, and I'll have to earn them all back. But why would I even want that? My current bank account is insured by the FDIC. That I have such a security promised to me by a large regulatory body, the US federal government, is more than a privilege and perhaps, as some people see it, a right. The bitcoin seemed impractical in the tangible world we choose to live in, contrary to the technologically advanced era.
But above practicality, something economic irked me about the bitcoin. At this point, as I set my biology textbook down on my bed, I had quickly given up attempting to learn about natural selection. There was a mystery afoot; something interesting and wonderful and a wonder to investigate. Picking up Naked Economics, I began flipping through pages of the work until I reached a page on inflation. It was the answer, I could feel it, but I didn't know why yet.
“In 1921, a German newspaper cost roughly a third of a mark; two years later, a newspaper cost 70 million marks. It was not the newspaper that changed during that spell; it was the German mark, which was rendered useless as the government printed new ones with reckless abandon." Charles Wheelan had taken a girl spun too many times and pointed her in the direction she needed to be to accurately pin the problematic tail on the donkey of bitcoins.
The thing is, people make mistakes. If people didn't, Napoleon Bonaparte wouldn't have decided to attack Russia in the middle of winter, a country so notorious for being cold that even alcohol freezes. He would have turned around and Russia wouldn't have been able to infamously scorch the earth and eventually starve the French army to death. But even Napoleon Bonaparte, seemingly immortal dictator of France, made a mistake. The same can be said of the world and its humans today.
The financial collapse of 2008 was caused in part by gambling of investors on Wall Street, betting against bets for people to pay off subprime mortgages who maybe shouldn't have gotten them in the first place as they couldn't afford the house they'd decided they wanted. It was a mistake--a bad one caused by the flaws in society that are naturally human--that no one wanted but we got anyway. What became known as the Great Recession toppled economies the world over, sending many into momentary freezes.
This is what the bitcoin was born out of, but this is also the bitcoin's greatest weakness. Because what saved all of us was the Federal Reserve.
The $800 billion stimulus that was set up was set up by a major regulatory body. The Fed authorized the printing of billions of dollars of money that the USA didn't have because we needed it. It authorized infrastructure projects and created jobs and worked to reduce unemployment so money could be pushed back into an economy that people were beginning to trust again. The stimulus allowed for us to baby step our way away from a second global economic depression. The problem with bitcoins is that there is no Fed, no group to watch over the humans who make mistakes on this planet, which happens to be all of us. The bitcoin isn't fool proof because it doesn't allow for a major regulatory body to generate more bitcoins when they're needed, and instead keeps the money supply constant. It is a system that works only because it's not the dominant system, not what people rely on to finance their daily exchanges. But in the future, I see a world of bitcoins.
It is because bitcoins are a symbol of money to come--the world is getting flatter, and money is becoming globalized just as the internet is. The hole in the bitcoin logic is easily filled; rather than no regulatory body, an international matrix of regulatory bodies would do the world just fine. A whole world would be on a global currency, which allows for people to do business readily. The playing field would naturally become flatter, as anyone with a few bitcoins could access anyone else. Moreover, countries suffering economic crises could move over to the bitcoin just as economies like Zimbabwe have dollarized. By using an international currency, countries are encouraged to lower trade barriers and restrictions. Bitcoins represent so much more than what they stemmed out of. They are an idea that people from all over the world can be even more connected than they are now, and this time through the economy.
Bitcoins themselves aren't a viable solution. But they are the idea that will pave the way for a new global currency. Not only are they fully transparent, but they have an infinite security behind them to prevent counterfeiting. My Future World is one filled with bitcoins--bitcoins everywhere so that no matter where you are in the world, you can easily interact with an increasingly connected and free market economy.