It’s easy enough to understand money when it passes through your hands. Comfortable denominations, a feeling of solidity and remarkably efficient for transactions. The credit card changed all of that. Suddenly, you could sign off on a receipt and your bank account got a little lighter every time you filled up at the petrol bunk, ate at a hotel or bought something you liked online. No wonder then, that Visa and Mastercard have grown to be among the most powerful corporations in the world – when they can levy even a sliver of a percentage of the millions of transactions that happen every day, it all adds up. And since banks have been around since the age of modern civilisation – over 2000 years, it gets a little difficult to imagine what life can be like without them. The crash of 2008 gave birth to a new phrase – ‘Too Big to Fail’. Even the banks that had made exceedingly bad lending decisions were put on the oxygen of taxpayer’s money – because the alternative was too terrifying to contemplate.
So it is mystifying to come across currency that is not issued by a bank or a treasury. Bitcoin is just is an ephemeral piece of code that exists only on the internet. Created in open source, the code is free to download and modify. And it is being used to buy and sell goods and services online – creating another economy that the world’s governments and corporations do not control – or profit from. The premise is simple. You open a Bitcoin account by downloading a program and ‘mine’ for coins by dint of your effort. You agree to get paid in the currency and your transaction is recorded. This can be exchanged for ‘real’ money like pounds and dollars at Bitcoin exchanges. This FAQ explains the basics. The transactions are completely anonymous, not monitored or centrally controlled. It’s already setting off a firestorm. Take this line in an article from the Economist – ‘This has not stopped some American politicians from expressing grave concern about the virtual currency. Charles Schumer, a prominent Democratic senator, has inveighed against it, claiming it is just what drug dealers have been waiting for‘.
Whether Bitcoin grows or ends in a blaze of controversy, the net is redefining what we think about the most ordinary facts of daily life. It raises an important question – if governments and corporations were no longer able to control the flow of money, what will the resultant structure look like? Will it be complete anarchy or will there be the enforcement of a new world order where the old paradigms of power are no longer applicable? The premise of Bitcoin – a safe, low-cost transaction option anywhere in the world not mandated by law and borders will send shivers down quite a few powerful spines – because it actually asks the question – Do we need banks at all in future?