What is bitcoin?
Bitcoin is an entirely electronic, non-physical, non-governmental medium for exchange within admittedly limited audiences. These audiences are generally limited to internet merchants and traders who have the technological ability to use Bitcoin over the Internet medium. (Without the Internet, without computers, there is no Bitcoin.) Bitcoin is gaining increasing acceptance as a medium for exchange and certainly has piqued increasing curiosity if not actual interest from segments of the investing community and the financial news media.
Bitcoin’s nomenclature is more than wordsmithing. It raises a degree of uncertainty as to whether Bitcoin will eventually be recognized as an asset, whether its theft, expropriation or misuse will be treated equally with crimes of takings of other physical or tangible assets. Congress and state legislatures have yet to act and various federal and state committees are only now dipping their toes into the water of considering these instruments. Possibly, existing laws governing derivative instruments may ultimately apply, perhaps on the premise that bitcoin must be purchased by the conversion of an existing, recognized government-issued currency.
The blockchain concept is an attempt to memorialize the asset, and Nakamoto reasonably foresaw the drawback (if only semantic and not necessarily practical or significant) of lacking a physical documentation of creation, ownership or possession. (I make an analogy to the same drawback of current electronic voting, using machines which do not produce any physical record of one’s vote.) Moreover, the tendency of bad actors like hackers, malware creators and terrorists (or government sponsors) to exploit and abuse technology is both growing in prevalence and efficacy. Such bad actors generally run parallel to or ahead of their technological colleagues in the employ of law enforcement, the military or the private sector. As such, they pose a persistent and serious risk to any system dependent on technology or external power sources. Can one really believe that Bitcoin will not one-day fall prey to such attacks? Such risks seem to make Bitcoin the polar opposite of gold and silver, which historically have been the accepted (if occasionally mocked) repositories for immutable value.
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