For all of its ease of use, money – whether banknotes, coins, numbers in a bank account or in the form of a balance on a plastic card – does have some inherent flaws. For example, it can be stolen with no chance of recovery, it can be laundered to hide illegal activities, it can be inflated or deflated to change its real value, and, when travelling, there is the risk of exchange rates and the dreaded foreign transaction fee. For the longest time, in spite of their flaws, these paper notes, coins, and currency values were the only option for conducting commerce; however, thanks mostly to the Internet and the rise of global e-commerce, today’s word is helping to change that.
Having existed for less than a decade, Bitcoin is a compound word consisting of bit, an abbreviation of “binary digit” and a nod to its coding heritage, and coin, a nod to its usage as a unit of currency. Being a fiat currency itself (like virtually all currencies) and rather volatile, the value of bitcoins has seen initial lows of almost no value to highs of well over $1,000 USD per bitcoin.
While it may lack the historical pedigree of most of the words we discuss, bitcoin is definitely making up for that in cultural and economic impact. Regardless of whether it is used as a legitimate means of transacting value or masking illegal, criminal activity, with the number of merchants currently accepting bitcoin growing to over 100,000 and including names such as PayPal, Microsoft, and Dell, bitcoin is becoming widely accepted. In addition to use for basic, monetary transactions, bitcoins, by being considered a commodity, are also used as an investment vehicle, such as for the purpose of hedging against inflation (Argentina) or government financial policy (Cyprus).
The first known use of the word bitcoin was, naturally, via bitcoin’s creator, Saitoshi Nakamoto, who, on October 31, 2008, submitted a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System on an electronic mailing list, stating, “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party… Bitcoin: a peer-to-peer electronic cash system.” Showing the speed with which the idea has caught on as well as the scepticism that has followed it, the respected periodical, Foreign Policy, commented in 2012, “Bitcoin, a digital currency that is either the future of global commerce or a high tech form of money laundering—depending on whom you ask.” Ireland’s Sunday Independent, however, in 2014, took a much more rational tone regarding bitcoin, declaring that, “Bitcoin is not really a currency, it’s a commodity. It has no value other than what people are willing to pay for it.” It appears that bitcoin is here to stay, much like other things, the direction it takes will ultimately depend on how we use it.