The bitcoin is a digital currency, grounded in cryptography, with a de-centralized distribution system. Photo via commons.wikimedia.org
If you’re a savvy business person who has been in the game for a while, you recognize that the web has infused change to so many areas: marketing, recruiting, supply chains and even the very concept of what an office is.
You might think, perhaps, the pace of Internet-driven change is about to slow down a bit. After all, there are some fundamental realities of running a business that seem fairly immune to Internet transformation.
Taxes are still taxes. Regulations are still regulations. And money is still money. Or is it?
The time has arrived to reflect on that last point, as the Internet revolution continues to re-define the conduct of business and society in the course of a few short decades.
The movement of money, backed by an inherent value, has been a basic staple of business interactions ever since civilizations evolved past the barter system.
The basics have been pretty stable for years. Currency changes hands during transactions. Countries have currencies. Credit can also be used, at a processing fee.
The bitcoin walked up to the dance floor among the dollars, euros, yen, pesos and kunas in 2008. At first, the other dancers hardly gave it a glance. And after all, it was invisible.
The bitcoin is a digital currency introduced on the Internet, grounded in cryptography. It is not tied to a single country, grounding value or fee structure.
New bitcoins are created by a process of digital “mining,” a complex series of computation-intensive computer steps, with a cap on the number of bitcoins that will eventually be produced. These expanded bitcoins are unearthed by self-elected computational miners across the world.
If it all sounds rather complicated, you can rest easy.
You use currency today without having to worry about the machines in the mint that produced it. Likewise, the use of bitcoins does not require knowledge of the creation process.
The bitcoin stepped on to the dance floor with a certain amount of digital street credibility, due to this elegantly thought-out approach.
The bitcoin also gained a certain added notoriety and visibility recently when the FBI clamped down on the secretive website Silk Road. The website specialized in promoting the trade of illicit goods, by some estimates to the tune of hundreds of millions of dollars. The currency of Silk Road, not surprisingly, was the digitally appealing bitcoin.
Bitcoins, however, are also used by pioneering-minded legitimate businesses, with thousands now accepting the currency. The businesses jumping into the act range from better-known names like Virgin Galactic and Reddit to a digitally inclined Subway franchise owner and a variety of web peddlers.
The biggest issue with bitcoins remains, however, the challenge of their evolving into a stable and broadly accepted currency with more momentum.
Many bitcoins, based on various reports, remain in the hands of digital hoarders. The value of bitcoins has increased significantly at times and additional financially motivated spectators have entered the game. When you consider the $9-per-bitcoin value of 2011 versus a value reaching as high as $1,000 per bitcoin at times in 2013, their attraction is clear. Still, the digital currency remains relatively non-liquid and unproven with roller coaster potential, full of risk to potential investors, due to the unproven nature.
Although the bitcoin is unlikely to replace currencies as we know them today, it does have the potential to serve as an increasingly powerful parallel currency that could be used worldwide with more ease than charge cards or country-based currencies.
Various experts at different media outlets have predicted that governments and banks with a vested interest in the financial status quo will gradually crack down on the bitcoin digital currency, while other experts have stated they foresee a growing role for it.
Regardless of its destiny, the bigger message of bitcoins seems clear: The very definition of currency is likely to continue to change in the decades ahead, propelled by the relentless evolutionary force of Internet possibilities.