[2014] Creation of something out of nothing, based on nothing, guaranteed by no one, persuading people that this something is worth anything – we wonder how much longer it will last and how many people will be worse off because of it.
The view reflected above is one of many comments coming up within the framework of discussions about bitcoin – i.e. a digital system with payment functions, created between 2008-2009, continuously gaining popularity.
The above opinions are not isolated, yet it does not change the fact that there has been a steady increase of the number of bitcoin users amounting to several millions. As noticed by the Ministry of Finance – bitcoin constitutes an agreed payment means for a specific social group, dealing with which is not in conflict with Polish law.
Let us be clear – the criticism indicated at the beginning does not fully reflect the truth. Let’s risk a thesis – virtual coins have no value; if they did they may only have re-acquired it. The greatness of – including the value of – bitcoin is the goal constituting basis for its creation, which effectively concentrates its biggest assets – its liberty and political independence.
No legal existance
Bitcoin does not have a legal definition, since – simply speaking – there is no act of international law which would regulate rules governing its use. The Polish legislator does not introduce such definition either. According to unofficial information, the Ministry of Finance awaits guidelines from the European Commission – which may be expected if the virtual monetary system develops to a degree threatening member states’ fiscal interests.
So how can bitcoin be defined? Is it a virtual crypto currency, regular money, an IT project enabling payments? Attempting to determine one formula is pointless. Many websites, comments and articles on bitcoin can be found in the Internet, permitting to get to know the functionality of this global system. They concern technical characteristics and economic rules rather than its definition. Specialists call bitcoin a synthetic commodity money due to its digital character and limited amount. Virtual coins are neither currency nor financial instruments from legal point of view. It is also hard to talk about is as of electronic money, for it has all started from a concept – an idea introduced by a natural person, obviously without the status of an issuer or central bank facilities. And the exchange rate is controlled by the market, hence without arbitrary decisions of any institutions.
Dozens of antipolitical intentions
Sovereignty, anonymity, high level of security, rapidity and simplicity – these are main characteristics of bitcoin representing its strength. Following the voices of practitioners let’s assume that bitcoin – built on the concept of money – serves execution of payments and that the decentralized system is safe, whereas the whole debated virtual architecture of electronic P2P payments will function steadily and effectively for many years.
In other words – virtual coins act as means of payment for which goods and services are purchased. That much and as much. Without getting to the bottom of mathematical and computer bases from which, in a way, bitcoin originated – the project itself seems relatively simple. Access to Internet, prices converted into bitcoins – for instance using Mt. Gox exchange, a click and a transfer. To join the bitcoin community, it is enough to choose a portfolio with virtual coins (e.g. mobile portfolio) and generate an address. The next step is just an essence of the whole system – the transfer of the given value between bitcoin addresses. There is also a possibility to use an intermediary who will position himself between the two parties to the transaction and will assume the exchange risk of virtual coins. Although it sounds mysteriously, , this is how transactions – or simple payments for goods, services or funding of a chosen person – are made.
Triviality and impersonality. That is where- according to its users – lies the strength of this scheme. Fifteen minutes of waiting for confirmation of deposition of funds, anonymity of the depositing party, low charges, unlimited possibility to make any cross-border payments and impossibility to block the account – these constitute crucial benefits of virtual coins.
Yet one fact must be remembered. Bitcoin should not fulfil investment functions. Treating it in such manner is simply dangerous due to its vulnerability to sudden value deviations Specific autonomy which characterizes virtual currency constitutes its weakness in this case. Such conclusion is a logical outcome of intentions lying at the heart of bitcoin’s creation. Making its holders more wealthy was not an objective. Bitcoin’s aspirations were heading in another direction – apolitical character and independence, starting from economies, banks, financiers to recovery authorities who cannot seize the Internet.
The future
Bitcoin’s peculiar rebelliousness is also subject to sceptical comments and opinions. One fact cannot however be negated – revolutionary character of the whole concept and the fact that its consequences are clearly visible. A growing number of users and entrepreneurs accepting payments with virtual currency (link to a map of accepting entities: http://coinmap.org/) becomes a fact. The European Banking Authority (EBA), exercising supervision over the whole European banking sector, so far warns only against a fall of bitcoin’s value and legally unsecured breakdown of platforms offering exchange of virtual currency. Officials also discuss introducing supervision over and control of bitcoins. The Polish Ministry of Finance has managed to mention the risk of uncontrolled capital transfers and has confirmed its willingness to take specific actions at the European level in its letter to the Marshal of the Senate. Whereas vetting of economic entities is to some extent possible – regular users, tired of financial institutions, can make a reference to a common, yet not very polite, saying about a caravan on the move.
Authors
Robert Nogacki, Michał Stępniak