To be really smart, though, if there is something you don’t know, you have to realize you don’t know it, because you can get in a lot of trouble if you don’t realize it.
Which brings me to the subject of this essay, something that I’ve been wondering about for some time: bitcoins.
A bitcoin is one of several so-called cryptocurrencies out there. One source I ran across indicated that there may be more than 1,100 of them, but bitcoin is by far the most commonly used.
As I understand it, some guy who has never actually been identified for sure created this currency for people who think having to use currency created and regulated by a government oppresses them. Although there are actual bitcoins in circulation, most of them exist on the internet. If you have them, they reside in a digital wallet until you want to use them.
Money has circulated in many forms over the millennia of human existence. We Americans have a legendary example in the purchase of Manhattan Island by a Dutch guy named Peter Minuit for something like 64 Dutch guilders worth of beads. Actually, what Minuit gave them was a bunch of cheap European tools that were rather useful to the Indians — especially since the Indians were giving them land where a different tribe lived, so it wasn’t as bad a deal for them. Somewhere along the way, a historian translated 60 guilders into $24, and that was what fourth-graders back in my school days were taught.
Another example is that Roman soldiers received part of their pay in the form of salt. Nobody I know would want to be paid that way, but lots of people are paid salaries. That’s in honor of those military men of old, whom we call soldiers — a name descended from the Latin phrase “sal dare,” meaning “to give salt.”
On a more modern note, I remember an economics class assignment that required reading a case study about a World War II POW camp where the soldiers converted the cigarettes in their Red Cross packages into the currency they used in trade among themselves.
Whatever the currency in use, whether it’s salt, beaver pelts or cigars, people have to be convinced that it is worth something. Generally, Americans depend on the Federal Reserve System as the authority that sets the value of our money. The Fed does that as the only entity that can create U.S. dollars and in America, dollars are the only legal tender for doing business.
That doesn’t mean you can’t use Rhode Island Red chickens or bitcoins when you pay your rent, that’s OK. But if you owe me, say, $40, and offer me a pickup full of turnips instead of actual Federal Reserve notes or a check written in U.S. dollars on a real bank, I can refuse to take it and you’ll still owe me $40.
I did once accept a nice 8x10 print of a couple of bighorn sheep in payment for a gambling debt the photographer owed me, but I certainly don’t make a practice of doing that sort of thing.
No government backs the bitcoin, though. Bitcoins are encrypted to prevent someone from manipulating them. They are created, or mined, via a computer process I do not understand. Bitcoins are regulated not by a government, but by the people who own them, through a complex computer program. The program keeps track of all the transactions and makes them public in a “blockchain” that is said to be indestructible and extremely trustworthy. It controls the mining of new bitcoins.
You would probably have to buy some with real cash at the beginning and keep it in your electronic wallet. In recent years, the value of a bitcoin has skyrocketed, so if you had purchased some a few years ago and just kept them in your wallet, you might be a millionaire today.
Well, like I said at the beginning, I’m not a genius, and I’m not sure I even understand what I’ve just written. If you do, you might find a few dozen inaccuracies in this essay.
But I am smart enough to realize that I don’t understand bitcoins, and it’s for that reason that I won’t have anything to do with them. I’m comfortable with depending on the Federal Reserve System to regulate my money. It isn’t perfect, but it’s always worked for me. Anyway, I’m not convinced that a computer program created by some anonymous person or group of persons will never be attacked or misused to my disadvantage.
So, I’ll stick with regular U.S. dollars when participating in the economy. They work everywhere in the USA and were easily converted to pounds and Tanzanian shillings when I needed them — and I’ve never had anyone refuse to accept them.
They also fit quite nicely into the wallet I own. Rhode Island Reds don’t.