Sunday, May 12, 2013

The Digital Case For a Liberalised Money System

By Jon Matonis
Tuesday, May 7, 2013

Bitcoin is the largest distributed computing project of all time. Through a smart mathematical model and the use of peer-to-peer networking, it offers a fantastic and necessarily liberal way for people and organisations to transact.

Bitcoin recently surpassed SETI, the search for extraterrestrial intelligence, as the largest distributed computing project in the world. By using the fast computing horsepower available globally, and long-standing cryptographic primitives, Bitcoin offers effective and affordable transactions without an intermediary.

Bitcoin is a currency that can be thought of as file sharing for money. It's simple to use, open source, and available to everyone. Individuals can buy Bitcoins, and trade them online, send them to friends or family, or use them to buy goods or services. Simple exchanges conduct transactions and companies such as BitPay set up the merchants and absorb any currency risk. Individuals and organisations can check the value of a Bitcoin at any time on Bitcoin Watch.

This method of transacting offers a huge change from existing services such as banks or the likes of Western Union  or MoneyGram, for which people have to pay fees to send money. It liberalises the whole transaction by removing the intermediary and allowing people to trade as they wish. Finally, there is a system that suits the user.

A bubble?

There has been a lot of talk over whether there is a Bitcoin bubble, given the changing value over previous weeks. Our perspective is that there is not, and that it was a case of media talk exacerbating a change. Bitcoin is here for the long term, over 11 million Bitcoins are in circulation (and the number will eventually be limited to 21 million in total), and the currency's value is clear now and over the coming decades.

Individuals, globally, already use Bitcoin to send money to other individuals or to organisations. Some of the more high profile organisations that accept Bitcoin currency include dating site OKCupid, the WordPress blog, as well as donations to organisations such as Wikileaks. But it is available to everyone globally, and can be used in theory for any transaction. Organisations can easily receive Bitcoins by adding their receiving email address on their website.

There has been concern expressed around regulation. Actually, we speak regularly to the regulators, and we express our perspective that Bitcoin offers a very useful service for individuals and organisations wanting to transact, and that we are an important part of the economy. There is good scope for sensible regulation on exchanges. Four countries - the US, France, Norway and Australia - have issued explanatory notes on the currency as it gains importance.

Unlike many of the payment processors, Bitcoin does not act as an intermediary and there is a minimal charge for using the service. It is available to any country and any person using an Internet connection on any device - supported on a P2P network with all transactions going through the Internet. Technology has enabled this phenomenal change.

What the foundation does

The Bitcoin Foundation, created seven months ago, acts very much in the way the Linux Foundation acts for open source software. We recognise that effectively we are up against established companies, and therefore a foundation is essential in promoting a level playing field for Bitcoins and discussing the issues around currency. Additionally, we focus very much on the standardisation of Bitcoin so that it is easily used globally.

We also do fundraising and compensate developers, as well as organising a grant program to advance the protocol. Although we are based in the US, 60 per cent of our members are elsewhere around the globe.

This May, we are hosting a conference on the future of payments. We will cover all the business, regulatory and economic, and technology issues.

The Foundation is here to preserve Bitcoin. It's important because never before have we witnessed valuable remote transactions that don't require intermediaries. We are a nonpolitical organisation and the world's foremost educator on the currency. Rather than enter moral issues around money or who spends it on what, we are keen to promote freedom of choice, through an open source P2P network, with regard to money.

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