THE SENIOR ANALYST
The Pursuit of
Happiness, and
Freedom, and also
Riches!
In a small corner of a museum, lies a tray of coins
of various ages and times. Coins that were lost in
the sea of their compatriots when they were in
circulation, but now, long after they are out of
use, they sit before us, as a testimony of man’s
ingenuity, and the undying symbol of the survival
and enrichment of human life.
But as one observes these coins, one can’t help
noticing how, over a long enough period of time,
the value of these coins decrease, even as their
denomination keeps on increasing. This gets us
thinking; will the value of money always tend to
reduce, ultimately reaching closer and closer to
zero? Can a currency thrive on its own, without
any control or regulation? And if it can, for how
long will it survive?
Let’s trace the evolution of currency over the
ages. While initially it was just a medium of
exchange, it got a legal tender by the
governments in the recent history, and now, in
today’s digital age we can see emergence of
digital currencies, most popularly, crypto
currencies like Bitcoins.
Bitcoins were introduced by a maverick
programmer by the pseudonym of Satoshi
Nakmoto in 2009. They are currencies that can be
mined by solving increasingly complex
mathematical problems. The miner has to incur
great costs and effort to do so, since with every
additional 2016 block of coins (At the present
rate, in about two weeks), the difficulty factor of
calculations increases. For this, the miner gets
rewarded with ‘fee’ which is in terms of lump
Jan 2014
sum set of Bitcoins (currently 25), which can be
traded for, and at the current exchange rate,
used for massive profits.
The moot question is; do we need a new age,
technology derived currency, to replace the
control of the central banks and governments all
over the world? Are we ready to democratize
trade and commerce, and give back the power
and control in the hands of those who are the
ultimate beneficiaries or casualties of our
actions?
Bitcoin is not a company or an organization. It’s a
project that anyone can contribute to. It’s like an
open source computer game that anyone can
play with. Nobody stops you from starting the
game. Nobody stops you from leaving.
But the stakes are high. The pot has become big.
And the money you gamble with can easily go in
any direction.
How do Bitcoins help in the said process of
democratization? Isn’t it as vulnerable to market
forces as the other currencies? Here is a quote by
Satoshi Nakamoto on freeing up the system:
"Problem with conventional currency is the trust
that is required to make central banks
work...banks must be trusted to hold money and
transfer it, but they lend it out in waves of credit
bubble in barely a fraction of the actual reserves"
Bitcoins has proved that a single good P2P (Peer
to Peer) program can, theoretically, replace
central banking system and government
intervention on monetary policies. It has, in
effect, made it possible for money to be, for the
people, of the people and by the people. It stands
out from the traditional currency, or even gold
for that matter, in that it is designed specifically
for this hyper connected, digital world of ours.
Moreover, Bitcoins are limited in number, are
practically impossible to duplicate, can be divided
up to any unit you desire and most importantly,
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