Online Currency: The Binary Gold Rush

How to make up a currency, get lots of media attention, and threaten currency as we know it

Feature by Alex Cole | 22 Apr 2013
  • bitcoins

Bitcoins! Should you buy them? Short answer: no. But! There’s a longer answer too.

For those who are pretty sure the world is talking about a video game currency (gold pieces FTW), Bitcoins are a virtual, digital currency based not on any commodity or government to limit them, but on complex maths problems that take a lot of computer power to generate. Every Bitcoin has a unique ID that can’t be faked, and using them as currency works without an exchange rate across countries, all held in a digital wallet on your phone, your laptop, or whatever device you can log in to.

What began as an interesting experiment back in 2009 has skyrocketed out of control in the past month, with prices jumping to over £66 per Bitcoin. It must be repeated: this is a virtual currency, guaranteed by no government or real-world object. Detractors claim this makes it unstable, based on utter speculation and a suckers’ game. Supporters say that’s pretty much true of most currencies anyway.

Over the past few months the price has jumped around more than a Glaswegian hen night, and shows no signs of changing any time soon. What’s worse, this could all just be a fad that we laugh about in two years’ time. Of course, it could just as easily be the case that the price is only going upwards from here, that buying now will quintuple your money, and that Bitcoins evolve into the universal credits from every sci-fi series ever. Isn’t speculative investment fun?

The promise of what Bitcoins could be has inspired some people to sell entire houses for it, trade their life savings for them in the hope the market will properly explode, and some great headline-grabbing stories have leaked about some lucky bastards who have made a ten-times return after putting in pocket change. Sounds great, will do wonders for the PR and sounds a lot more comprehensible for the average Joe than mucking around on the stock market. But one crash last month wiped out nearly half the value of all Bitcoins, before spiking back up again. So the short answer, if you’re still like most of us and scrounging for beer money, is still that it probably isn’t worth it.

Ultimately, though, this is the perfect kind of currency for nerds. It’s based on maths, lives on computers and mobiles, and if it succeeds, it gives them all the smug satisfaction of having been into it before it was cool. What can possibly go wrong?