Bitcoin

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The dismal science
Economics
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Economic systems

  $  Free market
  €  Social democracy
  ☭ Socialist economy

Major concepts
The worldly philosophers

Bitcoin is an Internet-based digital currency, authenticated using strong cryptography.

The economics

The interesting bit about Bitcoin is that it is entirely decentralised - there is no central bank backing. Bitcoins are entirely imaginary fiat currency, but not particularly more so than US dollars, and could be a general currency if 300 million people similarly behaved as though it was one. Its biggest problem as an exchange medium is that it is not widely accepted, and that trading is thus very thin indeed.

The Economist, for example, takes it seriously and finds it quite interesting.[1] Other economists think it's made of crack and is a scam, citing its inherent design problems.[2]

You can buy actual stuff with bitcoins! Mostly internet services, geek toys, phone sex[3] and illegal drugs.[4]

The advocates

The mathematics is robust, so internet libertarians think this is all that is needed, because they don't understand people and know very little about economics and apparently nothing of history. This then bites then in the arse when they discover that running a Magic: The Gathering card exchange site is insufficient experience to securely run a currency exchange.[5]

The decentralised nature attracts libertoonian idiots. (Go read the Bitcoin forums for more idiocy than you ever thought possible.) There are Bitcoin advocates who are not annoying Randroid fools, but you'll find them few and far between.

Should you buy in?

Right now, Bitcoin's main function is as a pump-and-dump scheme wherein early adopters - who have more bitcoins than anyone else ever will - hype it up so they can offload their bitcoins onto fools who think they'll strike it rich as speculators. Thus, Bitcoin's creators have successfully mined a hitherto-unexploited resource: the vast reserves of unexamined privilege amongst computer programmers.

External links

Footnotes