As Robert states, “A currency can’t simultaneously be a medium of exchange for commodities, and a commodity itself.” That smacks of using salt for currency. In some places, perhaps valuable. In others, not at all. A later, better system was the barter, where one actually traded all goods owned, many usable and others not so much so, and made the best deal possible.

Don’t burn all your money just yet.

Now the pencil-necked geeks are devising a way to have complete ownership and control of the currency itself, and to virtualize it so unless you play their game by their rules with their equipment and their medium you can’t play at all. And you know its going to cost, not just money, but time, effort, convenience, and risk. Oh, and yes, anonymity. Right, before I buy and sell anything with bitcoin I have to log on to the internet. What could possibly go wrong with that?

Like so much else these days, this is being sold to us as something that will make our lives more convenient and enriched. Bullshit. Its being introduced so someone elses life will be more convenient and more profitable. Where are the bleeding heart liberals, always so concerned for our welfare? Where are the libertarians, so eager to defend our freedom? Where is the free market, ever so ready to provide us with a friendlier alternative?

Robert, Robert, Robert. Please don’t piss in my ear and tell me its raining.

You put the cherry on top when you reminded me of an essential feature of this kind of money: Volatility. A currency can’t simultaneously be a medium of exchange for commodities, and a commodity itself. The money starts being a participant in the marketplace instead of just a bookkeeping device.

I’m not sure if bitcoin will work out, but I know that there’s a big need for its other major feature: Anonymity. We’ve pretty much lost that in a world in which most financial transactions take place electronically, and are permanently recorded. We need an equivalent to anonymous paper and coins, and these days, we need a currency we can shoot around the world electronically. If it isn’t bitcoin, it’ll be something like it.

We live in interesting times.

What are bitcoins anyway?

What are some perils?

Volatility, for starters. Its 52-week high and low produced a difference of $800, with many sharp peaks and deep valleys in between. And bitcoin, like any kind of money, only has value if everyone accepts that it has value. If another, more refined digital currency comes along with a “killer app” that makes it supremely user-friendly, users might sell off and abandon Bitcoin, driving the price into the ground.