I like having cash in my pocket — quite often not as much as I’d like — but there’s something about the rustle of banknotes and jingle of coins that’s comforting. It’s tangible. It’s real. It has value. And I know where it came from, how it was earned and how it will be spent, mostly.
But Bitcoin? Who knows what it’s worth right now, never mind for the rest of the day. Or tomorrow, never mind next week.
Somehow, I can’t imagine picking up some milk, bread and eggs at the grocery store and handing over a Bitcoin anytime soon.
“What’s that?” the cashier would say.
“A Bitcoin,” I’d answer, telling her that it was worth $60,000 last week. Now, it’s only $30,000 — or at least it was last time I checked, but it could be worth half that again, or three times as much, if only Elon Musk would stop tweeting about it. Every time the world’s erstwhile richest man puts his thumb to a tweet, Bitcoin goes up and down like a toilet seat. It is any wonder that Bitcoin investors are more than a little nauseous right now after one heck of a rollercoaster ride these past months. And who knows where the value of the cryptocurrency will be next week — or at any given moment when you can buy and sell the virtual currency. One moment you might be able to buy a brand new Tesla using Bitcoin, the next, it’d be like the German Weimar Republic where you collect your week’s wages in a wheelbarrow and could hardly buy that milk, eggs and bread.
“A Bitcoin?” the cashier would no doubt ask, still holding onto the milk, eggs and bread. At least with a dodgy bank note she can run it under the UV light at the side of the till, or run a blue marker across it to see if it’s a good one.
Heaven help me if she asked me in detail to explain exactly what a Bitcoin is, never mind what’s it worth.
“What country uses Bitcoin?” she might ask. Ah, sure that’s an easy question. No one. Although the Bank of Singapore suggested last month that the 12-year-old virtual currency might one day replace gold as its store of value. But that doesn’t mean you can be zipping down to the Gold Souk anytime soon and asking them to whip you up a nice little Bitcoin bracelet for the missus’ birthday or to splash around on Diwali.
“Nope, it doesn’t actually exist,” I’d let it slip.
But how can you buy milk, eggs and bread with something that doesn’t exist, she’d ask.
Oh dear. Now I have to explain that it’s completely virtual and only exists online. It’s like an online version of cash and you can use it to buy products and services, but not many shops accept Bitcoin yet and some countries have banned it altogether. Some companies, like PayPal — yep, the same payment platform that was founded by Musk on his way to creating his first billion in real money — announced last October that it would be allowing its customers to buy and sell Bitcoin. And those photos you see, the physical Bitcoins — they’re worthless without the private codes printed inside them. Worthless. While Bitcoin itself is worth less, or worth more, depending on the time or day. Or night. Or whenever you’re trading it.
Each Bitcoin, I’d have to explain to that cashier as the queue at the checkout gets longer, is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer. And people can send them, or part of a Bitcoin, to each other. And every single transaction is recorded in a public list called the blockchain — and it is blockchains that make it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.
“I know,” I’d tell the cashier as her eyes glaze over. “Think of it like being a digital ledger that recorded everyone that used a specific $100 note — and it recorded everything on which it was spent.”
There might be a bit of an acknowledgement at that. But then I could envision the colour draining from her face when I try and explain how Bitcoins are created and how some people build special computers to ‘mine’ for Bitcoins. In order for the Bitcoin system to work, people can make their computer process transactions for everybody. The computers are made to work out incredibly difficult sums. Occasionally they are rewarded with a Bitcoin for the owner to keep. The trouble is that the sums are becoming more and more difficult to stop too many Bitcoins being generated, and if you started mining now it could be years before you got a single Bitcoin. You could end up spending more money on electricity for your computer than the Bitcoin would be worth.
“That’s what Elon was complaining about,” I’d say.
Huh? Well, he complained this week that the environmental cost of mining for Bitcoins was too high, meaning the planet was getting too warm from all those computers whirring around and doing their calculations, using too much electricity that was generated from burning too much coal. And because Testa, Musk’s car company, is green and builds environmentally friendly electric cars, having his company accept Bitcoins didn’t look right. And that’s why he tweeted.
“And that’s why a Bitcoin today might be worth half of what it was last week,” I’d offer, catching a breath.
“Did you know the Aztecs used cocoa as money. Yes, money does grow on trees,” some smart fellow waiting patiently in the cashier’s line would say.
Then I might retort that in the mid-1630s, the economy of Holland basically went bust because too many people were speculating in tulip bulbs — the first stock market of its kind traded the flowers, you know.
“Exactly,” the smart chap would say. “Everything is only worth what value we place on it.”
I’d nod. Then I’d root around in my pocket for some a bit of loose change to buy the milk, eggs and bread. Bitcoins aren’t going Main Street anytime soon, I’m virtually sure of that.
Mick O'Reilly is Foreign Correspondent, Gulf News
