Bitcoin and Alternative Currencies

Video of our June 2nd 2011 teleseminar in the form of an interview with Metaviews researcher Ken Chasse by Metaviews President Jesse Hirsh.

http://metaviews.ca/the-future-of-authority-bitcoin-and-alternative-currencies

BitCoin is a 2 year old electronic currency that is taking the internet by storm. It combines the basic economic concept of scarcity = value, and that cryptographic operations are computationally expensive. Hundreds of businesses accept them as payment online, and the Electronic Frontier Foundation now accepts donations in BTC. The current global market is worth approx. $US 50M+ at current exchange rates, with over $5M USD traded on May 26th, increasing exponentially as BitCoin goes viral.

The coins are generated and transactions verified by participants' computation with increasing difficulty over time. Already supplies of cheaper older computer gaming graphics cards (more efficient per watt than a CPU) are running out and there's a run on newer models. There is talk about custom ASICs (chips) fabricated to generate coins more efficiently - would Intel one day cash in, or the US Nat'l Security Agency compute an attack on the market with their supercomputers? Unlikely, say supporters - currently the computational power of the market is beyond the aggregate of the top 500 supercomputers in the world.

With a huge gap in a micro-payment solutions for the net (Paypal notwithstanding), can a libertarian-friendly currency - backed by no entity or commodity other than mere collective community fiat and a strong cryptographic algorithm - replace traditional paper-based currency? BitCoin claims to be not easily manipulated, tracked or otherwise regulated by any government - presenting the ultimate in anonymous cash with instant micropayment capabilities transiting no middleman or costing any tangible transaction fee. This is fundamentally different from electronic payments with existing currencies in the digital economy - BitCoin is an entirely new currency.

How long until governments mount a strong attack against this 'non legal tender' as when the US Govt shut down Liberty Dollar? Considering bitcoin is just a flexible peer-to-peer protocol run on free open-source software, a technical solution to stopping worldwide trade would be nearly impossible without draconian measures far beyond China or Iran's dreams. Legal means are more likely, but the technicalities behind such efforts will be delicate and have wide-ranging side-effects on many aspects of online communication and collaboration.

Further, how does the development of alternative currencies like BitCoin relate to the emergence of the measurement of social capital as a kind of social currency? Social media makes it easier to not only measure social capital, but also transfer it among peers via recommendations and indications of trusted relationships. Is there a relevant link here that will drive these phenomena towards each other?

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