You’ve probably heard of Bitcoin. If you haven’t, it was the first ever cryptocurrency – a type of money which is entirely virtual. Whilst there are numerous cryptocurrencies today, Bitcoin is still the most well-known and by far the most traded. The identity of the creator of Bitcoin, Satoshi Nakamoto, has never been revealed – Satoshi could even be an alias of a group of people rather than just a single person.
Most of the world operates with Fiat currency – government-issued currency, which gives central banks control over the economy as they can control how much money is printed. Satoshi Nakamoto argued that this system was a bad thing, as it creates a centralised wealth, and can lead to people’s money being eroded through inflation as a result of central banks printing too much money. The solution to this problem was Bitcoin – a decentralised currency with a fixed amount of units issued (rendering inflation impossible), and a ‘blockchain system’ meaning financial institutions aren’t needed to verify transactions and ownership. Many people like the idea as they are almost impossible to counterfeit, can be spent anonymously, and are not controlled by a central bank.
However, the value of Bitcoin changes dramatically and constantly. In the space of a year, the value of a single Bitcoin changed from near £15,000 to around £2500. As of writing this, the value sits at around £8400, but by the time you read this it could be worth less than a pint.
For some, cryptocurrencies are still a relatively alien concept – the “currency” is essentially no more than a computer file. Is this the future of money? The fact that it has no physical ‘form’ is a bit strange, but does money even need a physical form? Who decided that gold is more valuable than silver? Who decides how much interest you get on your credit card? If we discovered a new metal on Mars, would we start making coins out of that because someone in an office somewhere said that it was valuable? Is the value we attach to anything arbitrary? Does anything really matter? Time to get in another round.