- They distrust everything that government does.
- They trust everything they read on the Internet.
- They love to make a statement about themselves by buying and installing things that baffle their neighbors.
Libertarians and anarchists are always trying to invent replacements for the frilly services that government provides. This includes home-schools, private media of exchange, and occasionally personal armies with nuclear bombs.
Nothing could fit this community more perfectly than non-government money, whose only proof is Internet messages, and which none of their neighbors are ever going to understand — or accept in payment for the damage that Spot did yesterday to the shrubbery.
Why it is a good thing
The value of Bitcoins is guaranteed by the fact that their supply is limited (with one small exception mentioned below). The limitation of the supply is guaranteed by its creators. Its creators live on an out-of-service oil platform in the North Sea, probably, from which they run a pirate radio station in their spare time. Buying ads on that station is one of several things you can do with Bitcoins.
Its creators send e-mail and participate in blogs through proxies. They have backup accounts in China and Zimbabwe and anywhere else that the Internet might be controlled against criticizing the Cabal but is wide-open for scamming.
In view of this, the Bitcoin user might ask what authority will guarantee that the Bitcoin's creators keep their promises. Not God, no one in the Bitcoin community believes He exists. No; the ultimate arbiter is the libertarian's sense of fair play. 'Nuff said.
Who uses it
Sites like Uncyclopedia validate users through their e-mail addresses. But Bitcoin users believe that the e-mail address is too great a disclosure for their desired forms of commerce. For example, even a seemingly nondescript address like
IShagGoats@unh.edu reveals that the holder is at a university. Bitcoin users instead have Bitcoin accounts that are human-readable strings of 33 characters, such as 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W. (Wasn't that readable? Of course not! It was worse than activating a copy of Windows!)
How it works
The only instantiation of a Bitcoin is an Internet message. The message includes who had the Bitcoin and to whom he gave it. In fact, the message includes a complete list of everyone whose grubby little hands have been on that Bitcoin since it was created. Obviously, these messages are going to get bigger and bigger. It turns out that's not really a problem at all because the Internet is getting better and better, and logjams and outages will, by next year, no longer happen at all.
When you receive a Bitcoin, of course, not everyone receives the message to that effect. However, as everything on the Internet is shared with everyone, the word ultimately gets around. When six different Bitcoin servers realize that you have been given a Bitcoin, it's pretty likely that you really own it.
You can't just create your own message claiming that everyone gave you all their Bitcoins. This is because all Bitcoin messages contain a secret password that neither you nor a long line of typing chimpanzees will ever stumble upon. The password is devised by the peer-to-peer network, whose computers are constantly working to solve one of the classic unsolvable problems in computing. Usually, they are striving to restore the pixels of a woman's nipples that were deleted by Wikia's lawyers to avoid criticism by lawsuit-happy evangelist gadflies. Every Internet message confirming Bitcoin transactions contains a piece of this unsolvable problem.
In 2012, the network required one million times more work in order to move a Bitcoin than it did when the Bitcoin was created and women were less well-endowed. The creators adjust the difficulty of the problem every 2,016 blocks (every two weeks). Already the creators have simplified the problem to recreating a single nipple. Varying the difficulty is touted as a way to make the value of the Bitcoin more stable even through shifts in exchange rates, as John Maynard Keynes taught politicians to gun the money supply to make needed investment and "get the economy moving," a move that can be reversed (soaking up the excess money) any year now.
How it grows
The Bitcoin network is programmed to increase the supply of Bitcoins in a geometric series. The increase in the supply solves two interconnected problems:
- The Bitcoin servers want payment for spending that computing time, when nipples are freely visible for a smaller payment downtown in the red-light district; and
- Everyone knows that it can't be money unless it is gradually inflated down to nothing, to the benefit of people who claim they have our best interests at heart.
Consequently, each server that succeeds in recreating the image of one nipple receives 50 newly minted Bitcoins. When both nipples are restored, the problem changes and the servers go to work de-censoring another pornographic image.
The creators of Bitcoins have promised that the inflation will magically stop when there are 21,000,000 total Bitcoins. As the supply gets close to 21,000,000, the payment for solving the current computing problem will get smaller and smaller. The creators believe that the Bitcoin servers will continue participating not in anticipation of these disappointing rewards but for the ability to send advertisements for Viagra and hair restoration to all the Bitcoin addresses in their files.
Of course, knowing how the system is put together, there is no chance that they will instead decide to create 21,000,000 additional Bitcoins and put them all in their own little Bitcoin account with that anonymous and unreadable name. Because they are libertarians and they don't believe in The System.
Exercises for the reader
The following are either unsolved problems with Bitcoins, or they are unadvertised features:
- The current value of a Bitcoin is about US $857.40. So the current value of the entire Bitcoin money supply is $210,000,000. Since this money was made mostly by having computers perform work that it's not clear anyone wanted done, it's just as unclear whose $210 million this is or what he will do when he realizes it's missing.
- By transferring a lot of Bitcoins to yourself, all at once, you can make all the servers in a small area conclude that the value of a Bitcoin is not ten dollars but one cent. Happily, this startling effect is short-lived, and rare.
- If you work for Bitcoins, there is guaranteed to be a taxman nearby who will want 40%. And he won't want it in Bitcoins.
- Buying with MasterCard gives you a refund if the color is slightly off. Buying with Bitcoin, at best, puts you in front of a jury that can't figure out how you paid at all; or (at your option) a small-claims judge who imagines you seated over at the other table in an orange shirt to go with your gray pigtail.
- Bitcoins give you absolute privacy. No one even knows your e-mail address (though Google could probably figure out the shortest path to your front door). However, if anyone knew that that was you buying from the porn shop, then everyone in the world would instantly know your exact collection of DVDs.
- Bitcoins also give absolute privacy to the people with whom you transact. So a list of vendors who trade in Bitcoins is pretty much a list of the world's most notorious drug-runners and slave traders.
- Bitcoins as a store of value assumes that people care about Bitcoins, a little more than they care about CompuServe, AOL, and MySpace; that is, that there will never be a next big way to stay one step ahead of the state.