Jan
12
Bitcoin wraps up
its best year ever
Currency is a social contract. Whether we’re talking dollars, euros, pesos, rubles, or yen, their worth is no more nor less than what the parties to a transaction agree they’re worth.
The word currency came into fashion in the mid 17th Century CE. It was coined (so to speak) from the Latin currens, meaning to run or to flow, as currency has a habit of doing. But the concept of currency started out millennia earlier. Had you lived long enough ago, you could have paid debts and made purchases with knives, salt, tea, whale teeth, coconuts, cattle, seashells, grain, and more.
In a manifestation of convergent economic evolution, official coins began appearing independently in India, China, and cities surrounding the Aegean Sea between 700 and 500 BCE. China introduced paper currency in the 11th Century CE. As for American paper currency, it was backed by gold until 1933 or 1971, depending on how you prefer to define “backed.”
I can wrap my mind around determining the relative worth of, say, a volume of grain and a cow. The leap to agreeing to accept pieces of minted metal and, later, slips of printed paper as representative of worth seems quite the cultural feat.
Currency hasn’t stopped evolving. If you’re alive at the moment, you’re aware of newer forms of currency, such as numbers that your financial institution records and that you exchange by use of a plastic card with a magnetic strip (and also, now, a microchip), a computer, or portable device like a smartphone or tablet.
And then there’s Bitcoin. Though not the first virtual or digital currency, it is by far the best known and most successful. It launched in 2009 when Satoshi Nakamoto, which may or may not be a real person’s name, released shareware by which people could “mine” Bitcoins through the execution of complex algorithms. The algorithm is designed so that the total minable quantity is finite and will likely be reached between 2110 and 2140. To the surprise of many, sufficient numbers of people and corporations quickly agreed on the value of bitcoins and began using them for purchasing and investing.
Bitcoin’s future looked shaky at the end of 2014, but Bloomberg View now reports that in 2015 Bitcoin “… gained almost 40 percent, knocking the Somali shilling into second place, the Gambian dalasi into third, and the Burundi franc to a distant fourth spot.” Bitcoin has become so successful that governments are in the throes of sorting out how to define it, and whether and how to tax it.
Charles H. Duell, the U.S. Patent Office Commissioner in 1899, went down in history for lamenting, “Everything that can be invented has been invented.” Poor Duell. There is no record that he ever said that. Rather, it appears that a 1985 advertising campaign placed those naive words in his mouth, making him an instant urban legend. In any case, if there is one lesson that history has taught us and that the technological revolution drives home daily, it is that there will never be a time when everything that can be invented has been invented.
Which leads me to wonder what the next currency will be. Stay tuned.