526 words — 3 minutes read

27 - pirate coin

What a ride the BTC vs any other currency has made in the last 48 hours. I don’t envy the people that have invested in Bitcoin (and especially those that have gotten on the bandwagon in the last few weeks)

Tonight I was a virtual guest at one of the german Pirate Parties and spent around 2 hours talking and discussing about Bitcoin: “Was ist Bitcoin”. There should be  a recording of the event and I will post a link as soon as I have it. The PiratePad contains some more questions and answers that were discussed after my talk.

There are two points that I’d like to make that have emerged:

There is a lot of questions about the “true value’ of BitCoins. The only way we have currently to determine value, is by comparing BitCoins to other currencies like the EUR or the USD. The last few weeks have seen an incredible rise in this “value”, followed by a huge crash yesterday and today. Who or what ultimately is responsible for this crash is unknown - it could be anything from people offloading loads of coins, manipulators of the exchange rate, a DDOS attack on the major exchanges etc etc. I was asked today what I thought was the true value of Bitcoins. The best answer I can give (not being an economist probably doesn’t really help here) is that we haven’t seen the real value yet. We will see that value emerge, when people are actually buying and selling tangible goods or services using BTC. With the recent hyperdeflation happening, that wasn’t something that was going to happen (you’d be stupid spending coin, when its value is bound to be 10% higher the next day). This crash is a chance to deflate the speculators and bring back some sanity to the market. (It will be interesting to see how the markets react to the re-opening of MtGox in a few hours - luckily I will be fast asleep by then)

The second issue is trust (and this of course ties directly into the first point). If (and only if) enough people trust Bitcoin as a viable currency will it take off and gain its own value. I used the words “Everybody has to believe in this shared hallucination” to describe this. The shared hallucination by the way, is not limited to Bitoins, I’d say that any FIAT currency only has value through many (many) people believing in a shared hallucination. This is not necessarily a bad thing, but the finance sector has done a lot in the last few years to undermine this. What is happening in Cyprus, Greece and what is going to happen in Portugal and Spain will severely impact the trust people have in the Euro.

So should YOU share this hallucination and trust Bitcoins? I am not trying to give any advice here. I think that Bitcoin (or any of the derivative alternative crypto currencies) solve a couple of very real problems that exist with money. They could become mainstream in a few years time, they could also just dwindle away. It is going to be an interesting ride.

Jens-Christian Fischer

Maker. Musician