I think the Internet is one of the greatest achievements of humankind and I have always defended its independence and at times slightly anarchic characteristics. Its latest by-product, however, is nothing short of scary and fascinating at the same time: a global anonymous non-traceable currency.
Most people probably have not heard of the term “Bitcoin” yet, but chances are that this might change pretty soon. Bitcoin is a decentralized virtual currency based on a peer-to-peer architecture and a really nifty cryptographic algorithm. It is an open source project with one of the core developers being Martti Malmi from the Aalto University.
Here is a short explanatory video by the project team:
So, Bitcoins live on your computer and can be verified against the network. There is no central authority like a central bank that issues them and the governments are not able to control it. If Bitcoins or a similar currency take off widely this could completely change governance, economy and public order as we know it. It provides a perfect mechanism for money laundry, illegal transactions and tax evasion, but it also has serious advantages like making banks redundant, preventing governments from printing money or manipulating markets as well as introducing a truly global means of exchange. More knowledgable people than me, like internet entrepreneur Jason Calacanis , have spent their time researching this issue and came to this conclusion:
After month of research and discovery, we’ve learned the following:
1. Bitcoin is a technologically sound project.
2. Bitcoin is unstoppable without end-user prosecution.
3. Bitcoin is the most dangerous open-source project ever created.
4. Bitcoin may be the most dangerous technological project since the internet itself.
5. Bitcoin is a political statement by technotarians (technological libertarians).
6. Bitcoins will change the world unless governments ban them with harsh penalties.
I highly recommend reading his article. It is fascinating. I think that actually his last point is going to happen: law makers will try to fight currency systems like these vigorously.
The founder of the original Swedish Pirate Party, Rick Falkvinge, thinks that eventually the attempts to shut down cryptocurrencies will fail similar to crack downs on peer-to-peer technology for file sharing. In his blog post he outlines the consequences of a non-traceable currency: current forms of income and wealth taxation will not be enforceable if the government cannot see how much you earn or possess. Instead he suggests replacing these personal taxes with a higher VAT tax rate and introducing a basic income for all citizens to alleviate the unbalanced effects of such a flat tax. I don’t think his proposal is going to work, though, because eventually the value-added tax will not be enforceable either.
I will follow this topic further because I don’t feel I have understood the concept and its consequences to the full extent. But it does seem that crypto-currencies like Bitcoin have a huge potential to be a global game changer, for the good and bad.