metonymy4u

Recently I learned of a phenomenon called “bitcoins.” Bitcoins are a form of currency issued not by a bank or government, but by a computer program. Basically how it works is that in order to obtain bitcoins, the requesting agent (computer being operated by a person) has to solve a very complex numerical algorithm. Once the algorithm is solved, bitcoins are issued to the solving computer, which can then be stored and used as currency. Of course, like all currency, it’s only worth what people believe it is worth. That is, it can only be used as a medium of exchange if others will accept it as a medium of exchange. And as with all currencies, including “official” currencies like the dollar or the yen, its value is a direct measure of the perceptions of the world community. And guess what? As perceptions of bitcoin legitimacy have increased, more and more companies are willing to accept bitcoin as payment for goods or services, and the relative value of a bitcoin has increased. At first I was tempted to think about bitcoins as a fundamental paradigm shift brought about by the internet and computing technology. A private individual issuing, through a COMPUTER PROGRAM, perfectly legal currency that can now be used to store real world value? Wow! But then I realized that, functionally speaking, bitcoins have been around for years. We just called them by different names: personal checks, stocks, bonds, bank loans, insurance policies, etc., etc. All of these are instruments of value, issued by no government, often carrying no guarantees, and, as we’ve recently learned, subject to very little regulation or oversight. What I think I find most disturbing about bitcoins, however, is the extent to which the moral bankruptcy of currency is so blatantly displayed. You are exchanging a real world investment of computing power and energy for the solution to a numbers game. World-wide the energy that goes into solving the algorithm that is required to obtain a bitcoin is measured in carbon emissions and human labor. Bitcoin computers are currently eating up about $150,000 per day in energy costs. Is this fundamentally different than the energy that goes into junk bonds, hedge funds, credit card debt, or insecure home mortgages? No probably not. But it does point up for me the degree to which our culture has realized the extreme down side of a market economy: value can be based on something that has absolutely no concrete benefits to any living humans. When value becomes merely and solely a measure of perception, then I think we are all in trouble.