Bobbing for Bitcoins

You don't have to mine for Bitcoins in order to use them. Typical users mostly just buy and sell them through exchange sites and brokers.

By | Wed 25 Dec 2013

If you haven’t heard of Bitcoin yet, you haven’t been paying attention. If you have, you still might not really understand what they are. But if you do, you just might be on your way to some serious riches.

Since the creation of Bitcoin in 2009, many varying connotations have been ascribed to the mysterious currency.  From being valued at only around $15 USD a year ago to hitting $1,000 USD this November, the exponential trend of Bitcoins reads like that of so many of our modern day successes and development patterns: rapid development, uncertain future.

Thailand made headlines a few months ago by becoming the first country to issue a blanket ban on Bitcoin, after the central bank ruled that it is not a legitimate form of currency. However, an underground Bitcoin subculture – fuelled in part by travelling, location-independent techpats – is only growing.

Perhaps it is time Thailand took a look into what just might be the future of currency, the true concept of Bitcoin, without preconceived notions, without a stigmatic lens. The future is ticking closer.

Bitcoin 101

The concept of Bitcoin on its own is very pure. It is the first decentralised digital currency and operates without regulation by a government or agency. Sound like anarchy to you? Not quite. See, like email made sending messages free, direct and instant, Bitcoin has done much the same for currency. Bitcoins are digital coins that can be sent through the internet, meaning that you do not have to transfer money through a bank or a middleman – everything is direct and fee-free.

Being a digital currency, Bitcoin can be accessed everywhere there is internet, from any country, without complicated international transaction hold-ups (say goodbye to hunting down Western Unions at the airport). Since you don’t use a bank, your account cannot be frozen, nor do you need to provide much personal information to transact.  At the same time, your privacy is safeguarded thanks to complex encryptions (hence why it has often been termed an anonymous currency – though it’s really all up to how you handle it). You don’t need to meet any prerequisites, and likewise there are no limits. Sounds too good to be true, does it not?

The Bitcoin system works on the basics of free economics and laws of economics. It is currency simplified and made accessible to anyone. One doesn’t need an economics degree to get into the action; however, it’s still rather confusing for the average, non-techie. As one Chiang Mai based Bitcoin user put it, “That’s what’s so great about Bitcoin. You do have to be smart, so it keeps stupid people out.” That’s only one man’s opinion, but he does have a point: Bitcoin is accessible only if you know how to use it.

But where does a Bitcoin come from? All we have is a name, most likely a pseudonym for one or perhaps an entire group of people. The name is Satoshi Nakamoto, the so-called “entity” that is said to have fathered the concept of Bitcoin. Satoshi is a Japanese male name whose meaning is something along the lines of “wise” and “quick-witted.” In Japanese, naka means “inside” or “relationship” and moto means “origin.” However, there is no record of such a person (or persons) existing at all prior to the creation of Bitcoin. Indeed, Satoshi Nakamoto is a mystery some of the greatest minds of our time have sought and failed to solve, a matching game of encryption styles yet to be tapped. But of course, this shroud of secrecy is necessary and wise, due to the potential disruption to the system and the push for money to move, the price on this person’s head (or heads) would be high.

Nakamoto’s process, the mining of a Bitcoin, is intricate and difficult to explain, but has been proven to continuously succeed. The mining itself, which is done by computers, is also how the entire system is logged, monitored and verified – in other words, it’s how the digital currency is regulated. So miners (those clever people) are essentially rewarded for the maintenance work that they (or their computers) are doing. The rewards, of course, come in the form of Bitcoins.

Still confused? Don’t worry. You don’t have to mine for Bitcoins in order to use them. Typical users mostly just buy and sell them through exchange sites and brokers. Of course, any Bitcoin transaction always holds risks, so it’s wise to take great caution and do background checks before paying up. And even if you do find a reputable seller, remember that much like stocks on the stock market, the value of a Bitcoin is always changing – sometimes for the better, sometimes for the worse.

If the Bubble Bursts

Interestingly enough, the Bitcoins in circulation are estimated to be only a few of those to ever be mined, positioning Bitcoin’s father, Nakamoto, to potentially be holding onto a stockpile worth at least an estimated $120 million USD, or roughly 3.6 billion baht. With such wealth attributed to such a deeply anonymous entity, many question the motives of its vanished creator. Is it one genius man? An interest group? A political group? Are libertarians revolutionising the world? And scarily enough, what if it’s a government? Imagine the international power. Or what if Nakamoto acted in the same vein as someone like George Soros, “The Man Who Broke the Bank of England,” or what if anyone for that matter managed to crash the system?

The value of Bitcoin is volatile, as everyone involved knows. But even as the value of the Bitcoin has started to decrease since peaking well over $1,000 USD, as it did last month, the future still looks bright.

Mulling over the subject with a Bitcoin aficionado in Chiang Mai, I asked what might happen if such a crash were to occur. He pointed out that were the creator(s) ever to crash the Bitcoin system, another of its type would just pop back up. The theory and practice will live on, and currency as we’ve known it will never be the same.

Michel Bauwens, co-founder of the Foundation for Peer-to-Peer Alternatives said of Bitcoin, “[Instigated by the internet] we have a great horizontalisation of human relationships today; boycotting controlling mechanisms such as states and banks said. The future of currency is peer to peer.” Or at least the peers who have managed to follow my attempt at explaining what Bitcoins are.

The benefits of Bitcoin are apparent. But some, including select leading economists, not to mention the Thai government, are not convinced. Some call it a bubble, destined to burst. Some call it fake money with no real power behind it (but then again, aren’t most currencies little more than pieces of paper without any real value behind them?). Some simply don’t know what to make of it. And so, as it often goes with things not fully understood here in Thailand, Bitcoin got banned.

According to the Foreign Exchange Administration and Policy Department in Thailand, “due to lack of existing applicable laws, capital controls and the fact that Bitcoin straddles multiple financial facets, the following Bitcoin activities are illegal” in Thailand:

– Buying Bitcoins

– Selling Bitcoins

– Buying any goods or services in exchange for Bitcoins

– Selling any goods or services for Bitcoins

– Sending Bitcoins to anyone located outside of Thailand

– Receiving Bitcoins from anyone located   outside of Thailand

Okay, so Thailand says a big resounding no to Bitcoin. But as Jake Maxwell Marks pointed out in business news site Quartz, “the Bank of Thailand does not have the constitutional ability to outlaw anything. But it is entrusted to administer foreign exchange, and the possibility of Bitcoin affecting Thailand’s foreign exchange rate and capital controls has the central bank especially wary.”

But why is the bank, and in turn the government, so wary? In the U.S., the Senate Committee on Homeland Security and International Affairs held their first congressional meeting on Bitcoin in November. The verdict? Highly agreeable on the benefits. They addressed Bitcoin’s innovative nature, emphasised its importance to the economy, and even praised the legitimate uses of it, despite the recent debacle of Silk Road (an online black market selling illegal drugs and dealing exclusively in Bitcoin, which was shut down by the FBI in 2013). It appears the U.S. doesn’t want to stifle online currency. Maybe they simply accept that it’s out of their control? Or perhaps they see the opportunity in it, at a time when the U.S. is in dire need of any sort of economic boost.

In Thailand, meanwhile, the doors remain officially closed. But that doesn’t mean Bitcoins aren’t sneaking through anyway. Search “Bitcoin Thailand” on Google and over nine million results pop up. There’s the cleverly named Bitcoin dealing site (among others) and several Facebook groups and blogs dedicated specifically to Bitcoin trading, mining and community building. As one of my anonymous Chiang Mai Bitcoin users noted, it just doesn’t make sense for the Thai government to not follow America’s lead and actively become a part of the Bitcoin community.

“This is where the future is,” he told me. “Not just with Bitcoin universally, but Bitcoin specifically in Southeast Asia.” It costs nothing to accept Bitcoin as currency and often increases business by doing so, especially benefitting small businesses. Illicit activity is a worry, especially with drugs coming in from Burma, but these are more likely to move west into Europe anyway, he says. Moreover, some believe the drug war is tapering off and leaving room for nothing but growth.

The economic climate may be fertile for Bitcoin, but how will Thailand know if it does not play a part? As Bitcoin supporters have put it, perhaps eventually the day will come that Thai consumers pay with Bitcoin loaded cards. Perhaps international trade will be fueled as a result. Perhaps Thailand will become a Mecca for a Bitcoin-driven economy. My guess is that only time will tell. But one thing is for sure, if you do manage to get ahold of some Bitcoins, don’t be like the unfortunate Brit who forgot about the Bitcoins he had stored on his hard drive from mining back in 2009, and threw it away. The estimated value of those now useless Bitcoins? $7.5 million. Let’s bow our heads and take a moment of silence for that guy.

Photos by Tinnakorn Nukul