There has been a lot of talk about Bitcoin the past few months. And you know what? There's going to be even more discussion of virtual currencies of any sort, as evidenced by yesterday's news about the Liberty Reserve money laundering scandal.
I'm also pretty sure I won't have the last word on this topic, either. In fact, I'm going to take this topic in a whole new direction.
But first, let's start with Bitcoin, the best known virtual currency.
The most obvious question is why. Why Bitcoin? Because, simply put, it's never been done before. An alternative currency, not controlled by any government, developed by an anonymous hacker? If it all sounds a bit like a science fiction story, like from the futuristic Los Angeles of Blade Runner, that's because it kind of is. There's just something about the idea of Bitcoin that captures the imagination. Some establishments are now even accepting payments in Bitcoins as well as cash. So, no. Republic credits will not be fine anymore.
(See also: The Basics on Bitcoin: 11 Things to Know About This Suddenly 'Hot' Digital Currency.)
But at the same time, there's something very, very familiar behind the idea of Bitcoin, too. A fixed quantity of virtual coins you have to either buy on the open market or mine, stored somewhere on some secure server because you don't want to be robbed of them. Sounds a bit like gold, doesn't it? Well, that's the point. Bitcoin is very much like gold. They both appeal to folks who mistrust government, central banks, and well, pretty much most of the world. They have their gold or Bitcoins, and they want to use them right here, right now. Like at a trading post, or a saloon.
And to me, it's pretty clear that Bitcoin's value as an exchange medium -- like gold -- is geared to people who live in a never-ending state of "me, here, now." Sure you can talk about trading gold or Bitcoins, but you don't know what you're going to be able to buy with either, or how much, from one day to the next. We have seen some very wild moves in Bitcoin markets. Who wants to constantly deal with that much volatility? The short answer is, not many.
Besides those issues, do you want to know what you almost never hear from either gold bugs or virtual currency enthusiasts? The idea of credit. Why? Well, think about it. If your mood can be described by the three words "me, here, now" as Peter Atwater is fond of saying, you aren't thinking of the future and you aren't thinking of other people. Your only focus is on right here, right now and yourself, so many of your decisions will be fear-based. It's as if you're at the top of the roller coaster and the only way to go is down, to the fear. As Felix Salmon said about Bitcoin, "Bitcoin, by contrast, is based on mistrust - it's specifically designed so that it's every man for himself."
So from that vantage point, a person talking about the idea of credit to a Bitcoin enthusiast might as well come from Asgard or perhaps LV-223. But the problem is, without credit, without trust, our economy starts to resemble some sort of closed system where the law of conservation of energy is the only law that explains it: Money, like energy, would neither be created nor destroyed, but merely transferred from one state to another. But clearly, this isn't suitable for the world we live in, where our population is growing and with it, the overall supply and demand for goods and services. Clearly, a different method to transact is needed.
So if Bitcoin is the digital version of "me, here, now," what is the converse of that? What is the digitized payment form of "us, everywhere, forever"? I think it's data. As Tom Cochran, the CTO of Atlantic Media recently wrote at AllThingsD:
The currency of the 21st century digital economy is your personal information. It has no transaction costs and does not decrease in value when the supply increases. Contrary to the laws of economics, it may even increase in value with greater supply. The more information you provide to companies, the more value they can extract from it.
I think the second to last statement is the most powerful one. An economic good that increases in value as more of it is supplied? That's like proving wormholes in the space-time continuum actually exist.
But look at the last statement in that quote from Cochran. You're not only providing information to companies when you share with them, you're giving them your trust. You're trusting them to do what they promised to do with your data, and nothing more. They're not going to mine and infer any more about you than what you want them to know, because, that's theft. So in that sense, data -- as a currency -- is the ultimate expression of "us, everywhere, forever."
But will people buy into that idea? I don't know. I suspect people will buy into using data as a currency as much – if not less – than proponents of Bitcoin do today.
But I have to say, it's an interesting time to be alive.