Value of bitcoins
There has been speculation for decades that someday we will live in a currency-free world. Economies would be fueled electronically, with only plastic cards, chips or even mobile phones allowing all transactions to take place.
We're not there yet, although it does appear today we're closer than ever before -- at least in the developed nations of the world.
One of the more radical experiments to emerge along these lines was the creation of the bitcoin. Invented in 2009 by an unknown person using the alias Satoshi Nakamoto, bitcoins exists exclusively in the digital realm -- free from the control and fees of central banks. They are tied to no country in particular, although their popularity is most pronounced in China.
Bitcoins also are unregulated, exchanged anonymously, and are not insured by the FDIC. They are extremely popular amongst criminal elements looking to buy drugs and other illegal goods. As long as buyer and seller agree the bitcoin has value, it works as a valid currency.
And, of course, because the "money" exists only in cyberspace, it is vulnerable to hackers. Japan-based Mt. Gox, the largest bitcoin exchange, is discovering this the hard way. Cyber thieves have made off with approximately $473 million worth of bitcoins from them, resulting in a bankruptcy filing. The theft amounts to roughly 7 percent of the $6.76 billion bitcoins in circulation.
Officials at Mt. Gox filed bankruptcy in the United States in hopes of delaying at least two pending lawsuits against the exchange by American investors who were burned in the exchange's demise.
We would hope residents in northwest Kansas were not amongst those who saw bitcoins as a worthwhile investment, although there likely was allure for anybody fancying themselves as tech-savvy. We would offer those very individuals should have been amongst the most suspicious of a unregulated exchange in anonymous cyberspace.
The multitude of merchants that have agreed to accept bitcoins strike us as being more trusting than the Internet should inspire. Bitcoins have been likened to lotteries by many financial advisers -- you might hit the jackpot or you might not have a thing. Particularly when the "value" of bitcoins swings so dramatically on a daily basis.
We won't go so far to equate bitcoins with the Ugandan bureaucrat promising riches in emails sent directly to you. But depending on how Mt. Gox's bankruptcy case unfolds, we just might.
Caveat emptor. Let the buyer beware.
Editorial by Patrick Lowry