As if EUR, USD and other currencies did not have enough shocks yet, here comes another: bitcoin

Bitcoin is a new kind of currency: it is the first truly digital currency. It uses peer-to-peer technology to enable instant payments to anyone, anywhere in the world.

Bitcoin comes with its own currency exchange where one can trade bitcoins for old-fashioned money, its own market watch and, most amazingly, smart devices that can exchange payments and do much more.

There is one thing, though, that all currencies have, but bitcoin does not have: a central authority. There is no central bank or regulator that governs bitcoin; all payments are done peer-to-peer.

Will bitcoin gradually replace traditional currencies? We shall see.

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Comment by Cyril Schmidt on May 31, 2012 at 12:11am

@Martin Davis: I would agree with your conclusion: "treat bitcoin with extreme caution", but not with the reasoning.

Firstly, ability to write English does not correlate with ability to run a currency exchange.

Secondly, bitcoin is indeed neither a fiat currency nor tied to a commodity, but that does not make it fictitious or meaningless. Say, US dollar is by law a legal tender in the US, but not in Europe. Does that mean that a US dollar bill becomes meaningless if imported to Europe? No. The same is true for bitcoin: although it does not have any intrinsic value, it can serve as means of payment, simply because the one who gets it expects to be able to exchange it for other currency. More on that here.

Thirdly, as regards volatility: yes, it is very volatile, so do not invest your pension savings in bitcoin. 

Comment by Martin Davies on May 28, 2012 at 6:29pm

I would entertain this with extreme caution!!!  Let's look at the site for a second which states a couple of things:

"Our English is not the best, but we do as much as we can to keep this site mistakeless"

HELLO these guys even made a typo in that statement !!!

Okay so being able to speak or write English is not a prerequisite for running a currency exchange however what is backing the value of this currency?

Debt - Is this currency fiat like?

Commodities - Is this currency tied to the value of say a commodity such as gold?

No, neither of these things, which makes it fictitious.

Then just to top it off, take a look at the volatility (also with typos) in the Bitcoin Market Bid. Oh my dear me, this has a higher standard error than the mean value of the currency itself. To be real, this is more risky than lighting a fire after dousing yourself in petrol and at the end of the day, it is still fictitious and meaningless. 

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