A Festive Interlude

The history of money can be traced back to barter where goods were swapped for other goods or labour. As societies became more sophisticated and better ordered, “value” was transferred from things to tokens (coins and eventually banknotes) which were more convenient than carrying a dozen chickens with you wherever you went. The coins were made of silver and gold, originally, and therefore held intrinsic worth. Until the Nixon shock of the 1970s, it was still possible to take a bank note to a central bank and demand for its value to be redeemed in gold (this was the reason why the Nixon shock happened – the value of gold metal vastly outstripped its “fiat value”), After the ending of the Gold Standard, all currencies (at a state level, at least) have been fiat. They hold value because the government issuing them says they do and people accept it.

The rise of the cryptocurrency, the Bitcoin, is highly unusual in that it was based as a trading (barter) system in payment for computation. It was created in 2009 as a “peer-to-peer cashless payment system” and has a theoretical cap of 21000000 bitcoins. It is not a state payment system and has no inherent value.

One of the first recorded use of Bitcoins in commerce seems to be for the purchase of pizza in 2010. It became notorious as a method of payment on the “dark web” and “Silk Road” where it could be used to purchase drugs amongst other things.

It is now possible to buy Bitcoins (or parts of them) through brokers, giving it the attributes of a Forex currency. By the end of 2010, the value of a Bitcoin stood at $0.30 and some 309 visits had been made to its Wiki page. In 2013, the value was $764 and the site had 26354 visitors.

In the current year, the value of the Bitcoin has exploded from a shade under $1000 in January to a peak of $19661 (mid-December), before a rapid devaluation to $14113 today. Many people who know little about cryptocurrencies have been quick to jump on the bandwagon (hence this year’s meteoric rise), but the current profile has all the hallmarks of a bubble set to burst.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.