Who is afraid of Bitcoin?

A lot of scared people it turns out. Most of them think that Bitcoin is just the newest toy for software engineers and other IT guys. Bitcoin is a virtual currency. The first of its kind. It is not linked to a government, gold or anything else. You can’t even touch Bitcoins unlike real coins. Bitcoins only exist in a computer. You can’t buy much with them yet, which is quite a problem of course. You can trade Bitcoins, but I wouldn’t recommend it. Bitcoin is pretty volatile right now. However you can create Bitcoins yourself. In fact unlike printing your own money this is encouraged. Mining for Bitcoins, as it is called, is not as easy as printing money. If you want to do it efficiently you will probably have to purchase special hardware. And there are restrictions on how many Bitcoins can be created at any given time.

So what is so dangerous about Bitcoin? Is real money dangerous? Real money is dirty, so you can get germs from it. But with virtual currency this is not an issue at all. Having too much real money on your person can be dangerous too. Considering all the alternatives, money is really useful, so the question becomes do we need another currency. Do we need a virtual currency? No, not really. But ask yourself did we really need the Euro?

Until 2002 we had a dozen more currencies in Europe. One day they were all replaced by the Euro. In retrospect this might not seem such a good idea. The Euro is not doing that well, as you may know. Who is afraid of the Euro? I was. I am not scared of Bitcoins at all. If the Euro loses fifty percent of its value that could lead to World War 3. If the same happens to Bitcoin, some investors will be upset I guess.

I think that people are more afraid of software engineers than of Bitcoin. And they have good reasons. A coder can create something out of nothing in his spare time without having to ask for permission. For instance, start a virtual currency. What are you supposed to do if one of those weird non “people persons” invents something crazy at home? What if he or she decides to stay anonymous? That’s even more of a problem.

I have my very own idea for a virtual currency. Okay, it’s more like an Exchange Traded Fund (ETF) idea. It would be easy to implement, but I can’t be bothered. The average ETF is just a basked of stocks. Usually this basket is linked to an index where stocks are weighted by market cap. Market cap is the total monetary value of issued stocks in the market.

I propose that we put 30 of the major currencies in IndexCoin. I call it IndexCoin (not registered yet) from index. We should also put gold in the basket to shut up all those people who say that gold is a currency. Oil, silver and a bunch of other commodities too. Now comes the trick. We should weight by inverse volatility to make IndexCoin less volatile. To create IndexCoin one would have to pay me a very small amount for maintenance costs. Otherwise it would be like any other currency. Except without any government regulation etcetera. But that wouldn’t be a problem since it is a synthetic currency derived from real currencies and commodities.

We should make it so that you can actually buy things with IndexCoin, else we would only have created an index or ETF. That part I leave to you. Actually I leave you all the work, I would just like to have a cut in the profits :). The algorithm is super simple. I can write it down on a small envelope. It will be more difficult to setup the peer-to-peer infrastructure and get the marketing going. I guess we could clone the Bitcoin infrastructure for the most part. For the marketing campaign I suggest handing free IndexCoins to “influencers’. Or if we can’t find any, to random bloggers.

When IndexCoin becomes a success I will delete all the related documents linking to me. I will call myself Ichiban I on the official IndexCoin website. If after a couple of years, I feel that I have made enough money with IndexCoin, I may decide to step down as unofficial chairman of IndexCoin. And go fishing for a couple of decades … On my enormous yacht.

Disclaimer: this post was written with absolutely no research. It’s quite possible that somebody thought of this already. Still I think that my idea must be different on several import points.

Headlines for April 11, 2013


By the author of NumPy Beginner's Guide, NumPy Cookbook and Instant Pygame. If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.
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