With news that Bitcoins, the relatively new decentralised digital currency, are soaring in value at the moment, I decided to take a closer look as to be honest I hadn’t heard of them until now.
Touted as a “gold standard for the Internet age,” as an Objectivist any mention of gold standard will always peak my interest! I found the following resources and views on bitcoins while investigating:
- What You Need to Know About ‘Bitcoin’ Currency – Entrepreneur
- Four Reasons Bitcoin Is Worth Studying – Forbes
- Bitcoin: The End of Capitalism, and the Rise of Chaos? – Before It’s News
- Bitcoin Bubble or New Virtual Currency – Naked Capitalism
- Bitcoins: New Gold or Fool’s Gold? – Enterprising Investor
In some ways, bitcoins have a promising philosophy, most notably the fact that no governing body or central authority can produce them in unlimited quantities at whim, along with many of the characteristics (albeit virtual) of gold and other precious metals, for example bitcoins too are durable, homogeneous and scarce.
But I just can’t get this thought out of my mind: An actual gold standard is just that – a standard based on gold; one which holds objective, physical, tangible value.
What are bitcoins backed by? What objective value are they based on?
Furthermore, if it were an equivalent gold standard for the Internet age, then why is its value going through the roof right now, with ‘bubble hysteria’ all around. And there lies the contradiction – with nothing objective behind it, all I can see it backed by is faith…
What do you think about Bitcoins? Am I missing something?