bitcoin

The promises of a decentralized currency: Think Locally and Buy Globally?

I once rented a part of a house that had been, well, not fully cleaned out from the previous occupants. It was a house full of hackers that had been variously occupied by friends and friends-of-friends for almost a decade as they passed through Austin on their way from or to new lives, which is to say, it had, well, "character".

One of the odder things left behind by the previous inhabitants was a literal pile of Final Fantasy boxes, completely intact save for the all-important registration codes. A bit of digging uncovered a fascinating tale of cross-border, tax- and fee-free value transfer. The former occupant, let's call him "Bob" was engaged in a business proposition with a colleague based in South Korea, let's call her "Alice." Whatever version of the RPG Final Fantasy had just been released in the States (only). This had proved very difficult to pirate, causing a huge untapped demand in Korea. Koreans, however, had been happily hacking away at another RPG game which was only just now catching on Stateside. So, Bob would tear off and destroy these registration codes, emailing the codes themselves to Alice in Korea. Alice, in exchange, would provide Bob powerful and rare in-game items for the newly-popular game - these were of less value to the Korean market, as it was saturated with players and therefore items, but there was no arbitrage market into the States -- before Alice and Bob, at least. Bob could then sell these on online grey markets for such items, effectively creating a way for both Alice and Bob to profit (rather lucratively, from my understanding) from local markets, and transfer value across borders without incurring bank costs, wire fees, or, for that matter, taxes. This setup lasted for as long as both were able to extract value from the arbitrage process, but obviously wasn't able to scale or even easily re-adapt to new opportunities.

With the rise and increasing stability of bitcoin as an actual contender for a digital currency, the global market suddenly starts looking a lot more local.

Social Currency Unleashed: Bitcoin? (on FastCoExist)

Here's one of our big ideas from last week's overview. I take the helm here and dive in to alternative currencies, like the crazy new kid on the block -- bitcoin.

Is bitcoin a key to unlocking social currency?

The earlier attempts all were centralized startups, each proposing a competing faux-currency to ease online (providing simplicity and improving trust) transactions and slowly build a virtual currency of sorts. Their business plans generally involved taking margins from the transactions or cost differentials. The early Internet currency attempts ran into regulatory problems (most countries frown upon private companies setting up alternate currencies, it turns out), and had to evolve their offerings to avoid getting shut out.

Bitcoin provides something different. Instead of a currency that has evolved from being backed by precious metals into fiat currencies, Bitcoin is backed by cryptographic algorithms, and has no company--or even an identifiable person--behind it. This shared system provides an amazing openness for a currency: Every transaction is part of a public, collaborative log. However, the people behind those transactions are known only by their account numbers, in a world where you can create as many accounts as you like.

Read the full article at Fast Co.Exist