On approximately the 8th of April 2011, Bitcoin – the internet currency set to topple monetary systems of olde – began it’s sudden dramatic spike in worth, according to the Bitcoin exchange service Mt. Gox.
Bitcoin value graph
Unlike standard currencies, there are a limited amount of Bitcoins in circulation at any given time and there will never be more than 21 million in existence. Their worth is determined purely by demand, which could skyrocket due to the relatively small amount in existence – currently just over 6 million. Bitcoin production is steaming ahead at the moment, but this will peter out around the year 2033. Production will continue at an ever reducing rate for many years thereafter. Below is a video offering further explanation of how Bitcoin works.
According to European politician Rick Falkvinge, cryptocurrencies are here to stay. He predicts that within a decade, the appeal of cryptocurrencies such as Bitcoin will reach critical mass, and the current monetary systems will break down.
The US Federal Reserve System has a major influence on the worth of the US dollar, and through that, influence on the worth of other national currencies. A decentralised cryptocurrency places the influence of its worth into the hands of the people who trade with it – a case in which the US Federal Reserve would be completely powerless.
The legalities of such currencies will inevitably be debated, and bills will surely be passed to outlaw their use – but like BitTorrent before it, the decentralised nature of Bitcoin means there is no head to cut off, and the anonymity of cryptocurrencies dissipates individual accountability. People will continue to use Bitcoins just as BitTorrents continue to be used to ‘illegally’ download copyrighted content.
Emerging economies will likely be pressured into complying with the demands of western powers, but unlike the western countries, emerging economies stand to benefit from universal cryptocurrencies. The pressure that the western countries will apply will obviously be of the monetary kind – an influence that will wane as the cryptocurrencies strengthen. Rick Falkvinge points out that taxation and welfare systems will need to be redesigned in order to accommodate cryptocurrencies, rather than trying to fight them.
Bitcoin in South Africa
It seems as if the interest in Bitcoin has spread beyond hacktivists and internet poker players. A large South African based “mobile operator” has made Bitcoin integration a long term strategy, according to Bitcoin developer Amir Taaki. Which company is adopting this, and what their motivation is, has not yet been made public. Below is the video in which Taaki discusses this.
Taaki is apparently working towards building corporate support for the Bitcoin framework which would give the currency its initial legitimacy, and would help prevent legislative opposition. A 3G network with millions of customers would be quite a bit of muscle for an Internet based currency – not to mention the financial backing that accompanies it.
The rise of Bitcoin means that the established global monetary systems might be facing a big challenge over the coming decade.
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