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Have You Heard of Bitcoin?

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I have to confess, this is completely new to me. But the online-only currency currently going through a massive boom looks extremely interesting, and could pave the way for a completely new economy. Here's a great vid briefly explaining how it works (h/t the Dish):

And as you can see, the currency doesn't look to be slowing down:


Here's Felix Salmon on the downside:

If millions of people started using bitcoins on a regular basis, the soaring value of bitcoins would actually be disastrous. You’ve heard of hyperinflation: this would be hyperdeflation. Take a gold bar valued at $600,000. At $60 per bitcoin, the value of that bar is 10,000 BTC. But then assume that bitcoins rise in value to $600 apiece, and then to $6,000, and then to $60,000 — as would have to happen if the fixed number of bitcoins was being used to store hundreds of billions of dollars in value. Then the value of the gold bar would plunge, in bitcoin terms — to 1,000 BTC and then 100 BTC and finally just 10 BTC. The same thing would happen to all other goods and services in the world, including your own salary. Everything would be constantly going down in price, if you thought in bitcoin terms.

And an interesting piece in Business Insider on why the explosive growth could continue, and why the potential upside makes it so worthwhile :

You may think there is no conceivable way that Bitcoin prices could ever hit $2,350.

And you might be right.

But ask yourself this question:

When Bitcoins were trading for $35 six weeks ago, did you think there was a chance that they would ever hit $235?

If you're like most people, you didn't.

If you're like most people, you either had no idea what Bitcoins even were ... or you cackled smugly about how Bitcoin was obviously a bubble and that all of the idiots stupid enough to buy Bitcoin would lose their shirts.

Well, just so you know, many of those "idiots" were laughing at you, too.

One of them reached out to me the other day.

He explained why he bought a boatload of Bitcoins when they were trading for much less than $35 apiece:

... over the long term the only two possible outcomes are 1000X+ or 0 — I don't know the probability of each possible outcome, but I firmly believe those are the only two possible options ... I actually don't think $400 is a meaningful equilibrium point for it.