Bitcoin: The Changing Face of Global Economy



Email lets us send letters for free, anywhere in the world. Skype lets us make phone and video calls for free, anywhere in the world. Now there’s Bitcoin; a new digital currency that excites computer nerds and incites passionate economists. It is the first decentralized electronic currency, meaning it is not controlled by any one organization or government. Used by more than 100,000 people all over the world, hundreds of thousands of dollars worth of Bitcoin are traded every day. The system cuts out the middle man, making each exchange personal from person to person. It’s the currency that appears to be a little too good to be true.

A Bitcoin is not a magical unicorn that simply pops into existence. Through a process called “mining,” computers within the Bitcoin network must race to solve increasingly difficult mathematical problems. The first miner to reach the correct solution must be verified to be able to utilize their earnings through the Bitcoin wallet software. Similar to gold or other precious metals, Bitcoins are rare, but rare in their technical, mathematical quality rather than a natural, physical occurrence. These are not any old algebraic equations either, because it’s all in the computer processing software and the power driving the program to mine faster than all the rest. Once a Bitcoin has been mined, the difficulty for the next coin increases, and it takes longer and more power to continue to mine. This creates a built-in guarantee to prevent inflation, making the currency capable of guarding itself against fraud and counterfeit. However, not all Bitcoin users need to be tech-savvy miners. The going exchange rate as of the time of this article is almost 700 USD.

Is it practical? It’s not like Bitcoin is the first-ever all-digital based currency. Others have existed in several failed forms over the last fifty years, but Bitcoin’s unique structure gives it the opportunity to have a real chance of wide adoption across the public. Bitcoin makes virtual payments possible for those who don’t have PayPal, which requires credit and personal information, even making online exchanges possible for those who don’t have access to credit systems. In some parts of the planet, such as Africa, Latin America, and south Asia, many people don’t even have a bank account. Bitcoin offers that infrastructure, minus the transaction fees and worry of credit fraud.

Bitcoin advocate Jonathan Mohan told PBS Newshour, “It’s my contention that—and a lot of people think this—that, just as in Africa, they didn’t go to phones. They went directly to cell phones, that, in the same sort of adoption curve, in these developing nations, you’re not going to see them start getting bank accounts. You’re going to see them just going straight to Bitcoins, because if you own a Bitcoin address, you have a bank account on your phone that you can interact on the global stage with.”

I’m not saying that we’ll all be paying in Bitcoin for tickets to North West’s 2050 presidential victory tour. But it’s an opportunity for global innovation, and the possibilities seem endless. You can’t use Bitcoin for much today besides online purchases and in-store shopping with a few technologically-hip merchants, and a vast majority of the money is held by speculators or miners. In fact, Bitcoin is still struggling with establishing its legitimacy with the arrest of the Bitcoin Exchange CEO in aiding Silk Road, an illegal drug site. The currency is still so volatile that it’s value jumped from $200 in October to more than $1,000 in January.

Whether or not it is Bitcoin specifically that we will use on our next trip to the grocery store is still undecided. But digital currency is the next step in global currency to look forward to. Critics claim it is little more than the latest speculative mania, no less ridiculous than the Dutch fever for tulips in the 17th century. Given time the currency could flourish, with more users and a wider acknowledgement of the product by the public. Or Bitcoin could wilt, just like the tulips, and we’ll be back to the drawing board for a new virtual ticket to global currency.