A couple of weeks ago I came across this Bitcoin idea (see video below). But, it wasn’t until I read an article in this week’s Economist magazine that featured Bitcoin that I decided to take a closer look. I’ve long wondered whether or not technology would be able to keep Wealth Alchemist at bay and I was heartened by this quote from the Economist:
Legally, Bitcoin exchanges are subject to the same regulations as ones trading commodities. For example, an exchange must report any transaction above $15,000, a policy meant to stem money laundering. For the purposes of taxation, meanwhile, reimbursing somebody for a product or service in BitCoins is treated as barter. The tax code makes provisions for such practices, though, admittedly, they can be tough to enforce.
This has not stopped some American politicians from expressing grave concern about the virtual currency. Charles Schumer, a prominent Democratic senator, has inveighed against it, claiming it is just what drug dealers have been waiting for. All the clever cryptography means Bitcoin dealings are difficult to trace. But not impossible. According to Bitcoin’s defenders, its users may be more difficult for a government agency to pinpoint than someone paying with a credit card. But they are easier to catch than those using cash.
Moreover, any drug trade involves sending physical products to recipients. Authorities already track many packages sent by groups under investigation. When it comes to physical delivery, the method of payment is irrelevant. Another worry, for the authorities at least, is that, in theory, a Bitcoin account cannot be frozen. But, like cash, Bitcoins can be nabbed by seizing the computer on which they are stored.
I’m sure that Sen. Schumer concerns about Bitcoin extend to more than just drug dealers using it, but rather that ordinary folks may use it to escape the prying eyes of government . . . especially the Internal Revenue Service. That would sends chills up the spines of Wealth Alchemists everywhere.
Admittedly, it seems I am a bit late to the party when it comes to Bitcoin. Yet, as an Austrian economist, I’m fascinated by the opportunities the web brings to witness the evolution of alternative institutional arrangements in a rather quick fashion. It also doesn’t hurt that Bitcoin is also operating in a area that Austrians feel have been manipulated by government, for their own benefit, for far too long–currency.
As such, I’m going to delve into this Bitcoin phenomena to see if Austrian theory is in any way useful to understanding its evolution. Perhaps Bitcoin, like many of its predecessors, flames out or maybe it finally hits on the right recipe for success. In either case, it will be educational to watch and I’ll do so publicly via Wealth Alchemy when I find something interesting.
However, my attempts to understand the Bitcoin economy from an Austrian perspective will be limited by my ability to practically participate. Put simply, I need my own Bitcoins. You will notice in the top, right-hand corner a “Bitcoin Plus Miner” widget that will allow you, the reader, to add computing power in my quest to mine Bitcoins. Simply hit the “start” button and a mining we will go. It will not slow down your computer as it uses only spare capacity, but if you have concerns check this out at the Bitcoin Plus website.
Of course, being an economist I don’t expect you would do this out of the kindness of your own heart. So, I’ve activated a portion of the program that will give you a kick-back on any of the Bitcoins you create–note that you will have to open an account at Bitcoin Plus to retrieve them. If I understand the code correctly, it looks like a 30 percent kick-back. With Bitcoin Plus taking 15 percent, I’m netting 55 percent. Definitely not a “get rich quick” scheme 🙂
I’ve already been Bitcoin mining at the Bitcoin Plus website and, with about 8 hours run-time, I’ve mined 0.001106 Bitcoins. According to Bitcoin Plus, one Bitcoin has been worth about $7 so I’ve earned about eight-tenths of one penny (rounding up). I’ll keep you updated on my Bitcoin progress as my computer pretty much runs 24-7 anyways so I might as well use the down-time in some productive manner.
For liberty’s sake, let’s hope this works out . . . we don’t need any more “Quantitative Easing” bailouts.