Viswanathan K's Thoughts

A few years back, I’d written a blog on Bitcoin, the digital currency. Yes, Bitcoin is like the dollar, pound, Euro or rupee. It’s a currency. Except it isn’t issued by any government. We won’t get into the technical details of who creates it, fraud prevention etc here.   Bitcoin’s exchange rate against the dollar (and every other government issued currency) keeps making headlines regularly. For both its sharp rise and for its sharp falls. Over 10-15% drops over a weekend aren’t unheard of.   Over the years, Bitcoin hasn’t taken off as a currency at all. As James Surowiecki wrote recently: “Almost from the beginning, only a small percentage of Bitcoin transactions have been for actual goods and services — and of those, many have been for illicit goods and services, like drugs and online gambling.” And today? “On average, there are now around 325,000 Bitcoin transactions — including trades — per day. There are roughly a billion credit card transactions per day.”...

The digital currency, Bitcoin, has been designed such that only a fixed amount of it can be created (“mined” is the technical term). In other words, the total amount of Bitcoins that can ever be created in the world is a certain fixed number. It’s like saying that the total money the world can have is, say, $100 trillion. Back in college, I remember reading Ayn Rand’s views on the gold standard. In case you’re wondering, the gold standard was a system that demanded that paper money must be backed by gold. What this meant was that a country couldn’t print money unless it had the gold to back it up. When Nixon sounded the death knell for the gold standard, critics like Rand worried that it would give governments the right to print money indiscriminately to pay off government debt or to finance populist schemes. That’s a fair criticism, but I remember my dad’s counterpoint when I’d mentioned Rand’s argument to him (I paraphrase from memory): “Why should the total supply of m...

Recently I read this awesome book by Nathaniel Popper on the digital cryptocurrency, Bitcoin, titled  Digital Gold . Boy, is it informative and superbly written! Why the need for a new currency? 1)       Ideology : Many people in the US in particular dislike and distrust the power of governments to print money because, if done for the wrong reasons, that dilutes the worth of existing money. Now, it is one think to be wrong due to unforeseeable reasons; but let’s face it: governments mostly do wrong things because they are doing them for vested interest groups and for votes. 2)      Privacy : In the West, as most transactions are via credit cards, credit card companies and banks know what you spend on. Plus, of course, the government can force both of them to share that information. 3)      Experiment : For many, this was a chance to try something new, to test their software skills. For others, to understa...