As everyone surprise the value of all the bitcoins in the world blew past $1 billion for the first time ever. It is good achievement for a virtual currency backed by no bank authority. There are many reasons why the bubble is certainly to burst.
The first absolute reason is just that it’s a bubble and bitcoins are an uncomfortable combo mixture of commodity and currency. The commodity value of bitcoins is primarily rooted in their currency value, but the more of a commodity they become; the less useful they are as a currency.
Still, it’s worth taking a look behind the bitcoin bubble, because there are fascinating implications for anybody who cares about payments, or currencies, or trust. There is perfect instance where one individual with his Windows computer turned on and connected to the internet.
On that computer there was a wallet containing 25,000 electronic coins. The individual came across next day around where the wallet was still there. But the money was gone. Those 25,000 coins were, at the time, worth some $500,000; today, they are more than worth about $3.5 million. The only way individual could get his money back would be if thief were to transfer it back into his wallet.
That’s one of the things about bitcoins: once you send them, they’re actually sent. Similarly, if individual sends you bitcoins, you know for sure that you own them. The individuals don’t require knowing or trusting the sender — all you require to know is that the coins have arrived in your virtual wallet, ready for saving or spending.
Bitcoins were professionally designed to be the perfect digital currency as they’re frictionless, anonymous, and cryptographically astonishingly more secure manner. For individuals who have suffered the incompetence of a bank will enumerate that the promise of bitcoin is the holy grail of payments.
Eventually for the time being, bitcoin is in many ways the best and cleanest payments mechanism the world has ever seen. So if global users ever going to create something better, people are going to have to learn from what bitcoin does professionally right as well as what it does wrong.