Bitcoin: More ideology than trustworthy currency

The four-year-old digital currency Bitcoin is riding an all-time high right now. As I write this, a single Bitcoin buys more than US$125, valuing the total Bitcoin circulation at more than $1 billion. But I won't be buying Bitcoin any time soon, because it seems little more than hype built on a fantasy.

I can understand Bitcoin's appeal. It's supposedly untraceable, allowing you to buy illegal drugs online — or trade in more legitimate products and services without having to pay those pesky taxes. You can make your own Bitcoins out of processor cycles, like some fiscal perpetual motion machine.

And, perhaps more importantly, Bitcoin is an embodiment of disruption — in the strange, mutated startup-speak understanding of that word, where disruption is apparently a Good Thing in and of itself.

"Soon, whether via Bitcoin or whatever comes next, it will be possible to strip banking away from bankers and money away from governments," wrote Hugo Rifkind in conservative British publication The Spectator. "There's a whole emerging political philosophy here, similar to the crypto-anarchism of the likes of Julian Assange."

Rickard Falkvinge, founder of the first Pirate Party, went even further, claiming that Bitcoin will change society more than the internet itself. "The net, after all, only allowed people to talk and shop more efficiently. By comparison, Bitcoin eradicates the government's ability to operate," he wrote.

Now, the urge to eradicate governments run deep through internet culture, or at least certain parts of it. I've written previously how Silicon Valley culture was, in part, a collision of the freedom-loving hippie counter-culture and the freedom-loving geek followers of Ayn Rand — neither of whom were fans of The Man. Once more, I recommend Adam Curtis' three-part documentary, All Watched Over By Machines Of Loving Grace. And let's not forget John Perry Barlow's overblown A Declaration of the Independence of Cyberspace of 1996. Read and laugh.

But I don't want my money to make some crypto-anarchist political statement. I just want to use it — to get paid for the work I do, to pay for the stuff I buy — and then get on with my life. I want a currency I can trust — and Bitcoin fails to deliver.

It's not that Bitcoin is a "made-up" currency, because every fiat currency is essentially made up. But when I pull some banknotes from my pocket, it's pretty clear who I need to trust: the nation-state whose central banker's signature sits in the corner. I can look at the world around me and decide that, yes, Australia, or the United States, or Singapore looks like a thing that exists and will last long enough to back up the promise implicit in those coloured rectangles. With Bitcoin, I have to trust some damnably obscure mathematics, and hope that the crypto never gets cracked. Yeah, right.

When something goes wrong with a transaction in boring old traceable dollars, euros or yen, it's their very traceability that helps me get my money back. As F-Secure's Mikko Hypponen tweeted just hours ago, "When you have highly valuable, completely virtual, and almost entirely untraceable currency, there will naturally be a lot of theft". I'm not sure that a decentralised, anonymous network of untraceable anti-authoritarian players will be interested in helping me out.

Even Falkvinge admits that Bitcoin is "still far from ready for prime time", hardly a ringing endorsement. Witness its wild swings in value this week as Mt Gox, the biggest Bitcoin exchange, suffered a denial of service attack. Why did that happen, exactly, and who profited from those sudden surges? The Economist reckons we're looking at a bubble, noting that Bitcoin's price seems to track the number of people searching for it on Google.

And then there's the fascinating little fact that there'll be fewer new Bitcoins available over time. Bitcoin enthusiasts reassure us that early adopters aren't unfairly rewarded by this scheme, and that it's not a Ponzi scheme. But then, they would say that.

"In more pragmatic terms, 'fairness' is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing 'fairness' is no goal of Bitcoin, as this would be impossible. By starting to mine or acquire Bitcoins today, you too can become an early adopter," they write. Gosh.

There may well be an anonymous digital currency in our future, but I'm leaving Bitcoin well alone.