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Fri November 29, 2013
Early Champions Of Bitcoin Reap Unexpected Windfall
Bitcoin, which is basically digital cash, has been getting a lot of hype lately as governments such as Germany, China, and now the United States begin to recognize its validity. That recognition has led to financial speculation on the digital currency, and bitcoin’s value has soared.
Early Adopters Hit The Jackpot
The more I heard about the booming value of bitcoin, the more I thought of the Libertarians and Anarchists who have made New Hampshire their home. People in this “liberty” community were early adopters of bitcoin, and I figured, these guys must be making bank. So I asked a friend to set up a meeting for me. And when I arrived, a small of group of Anarchist and Libertarian type folks were gathered around a table, looking at something.
So it’s about 4 by 4 inches, and it has a circuit board, and a heat sink, and a fan sitting on top of it, and it plugs into computer via USB.
Pedro Aguiar describes a dusty piece of hardware he purchased for $150 dollars a year ago. When he plugs this device into his computer, Aguiar says, he joins a network of computers that collectively mint new bitcoins. He says “I want to be part of what maintains bitcoin.”
When some of these folks started using bitcoins, they were worth just a couple dollars each. Recently, bitcoins are going for as much as $1,000 a piece. As Pedro Aguiar says, it feels like winning the lottery. “I mean, it’s exhilarating,” he says.
People in this community tend to be pretty cagey about sharing personal financial details. So it was hard to get anyone to tell me exactly how many bitcoins they own. But one person did say he invested relatively little back in 2011 when each coin was worth just $6 or $7 dollars. He says today, he has more than 10 times his annual salary in bitcoins.
Growing The Cryto-currency Economy
Of course, the return on investment is not what got this crowd into bitcoin. Mike Segal is a libertarian-leaning software engineer. He says he got into bit coin “because of what it represents.” He says “whether or not bitcoin itself would take off and make me money that wasn’t so much my concern, my concern was to support a growing crypto-currency economy.”
The idea is to create a currency that circumvents both the government and taxes, and avoids banks and transaction fees. As anarchist Curt Howland says “ bitcoin started as, hey, stick your finger in the eye of the man.”
See, these folks detest centralized government.
Howland continues, “I would like to make a soufflé in Washington DC, and then jump up and down real hard so it goes shhhuptck! down and collapsed. That would be great. That is what I’d like to make of the federal government.”
And here we arrive at the big paradox. It is recognition from federal governments both here and abroad that is driving the value of bitcoin ever higher, accelerating its use, and encouraging speculation. In essence, making it more successful.
Howland says he worries federal recognition could inevitably lead to federal regulation. And as far as he’s concerned, that would jeopardize the currency’s biggest advantage. Mike Segal, the software engineer, says the problem is deeper than just disliking the feds. He says, let’s say the government starts tracking bitcoins, and finds out some were exchanged for sex or drugs:
And then they try to blacklist certain bitcoins for example, based on what they were used for, then that destroys the fungibility and makes bitcoin less useful.
And so, as Segal and others in this liberty-loving community score a fortune they didn’t necessarily go looking for -- they also worry -- that bitcoin’s success could cost it its integrity.