Tag Archives: virtual currency

The Not So Flat World

Road closed by gateThomas Friedman wrote a book in 2005 called The World Is Flat in which he painted a borderless world. It would be borderless in terms of trade, information exchange, resource sharing, politics, and workflow. His premise was that the Internet and associated periphery would level the playing field so that all countries could enjoy prosperity and the full employment. Nine years later, we are certainly further down that path, but there have been some setbacks and roadblocks.

Rebuilding Walls

A recent article suggests that not only is the world not flat, but borders are reappearing that indicate that countries and cultures are closing their doors, as opposed to opening them. In the article, the author suggests “the burst [of the Internet] is leading to a world that is disconnected from physical and political geography.” In other words, there are two developing worlds—one physical and one virtual—and they are not necessarily in lockstep. This idea aligns with recent blogs that I have written on virtual currencies and the retrenchment of countries after the revelation of National Security Agency spying.

Borders in the Physical World

In his book, Friedman cites the 1989 fall of the Berlin Wall as evidence that borders are opening and the world is becoming flatter. He argues that this event ushered in a new era of cooperation and a homogenization of communist and capitalist ideals. It was indeed a momentous occasion and did much to introduce western thought into former communist East Germany and beyond. The eastern block countries struggled mightily as western marketers suddenly discovered untapped consumers. They struggled to build their own industry to compete in this new, flat world. This great change aside, borders are still rising and falling as evidenced by the recent integration of Ukraine back into Russia. I think we will see more countries follow as they decide which combinations will bring them the most prosperity and stability.

Borders in the Digital World

Much of Friedman’s book focuses on the Internet as the great leveler. As people have broadened access to thought leaders, they expand their thinking beyond their geopolitical borders and are influenced by a host of outside sources. If we consider this a separate world outside of physical boundaries, then the possibilities are unlimited. Virtual currency is trying to accelerate this growth of the digital world by creating a trading mechanism, uncontrolled and independent of the currency attached to a physical country. Even the digital world has borders however, generally where it intersects with the physical world. Europe, Russia, and China are all talking about creating a local Internet where citizens trade within their own borders and are protected from influences outside of their borders. Thus, the world is becoming less flat as countries and regions struggle with how to keep their citizens secure from threats that were not supposed to develop in a flat world.

Thoughts

Two things intrigue me about this idea of a flattening world. One, the idea that there may be two independent developing worlds, and two, the fact that borders fall and borders rise in both worlds. Again, independent of each other, or at best, loosely connected.

Do you think the world is getting flatter, or do you think it is getting spikier? What do you think of the notion of two separate worlds? Let me know your thoughts.

About Kelly BrownAuthor Kelly Brown

Kelly Brown is an IT professional, adjunct faculty for the University of Oregon, and academic director of the UO Applied Information Management Master’s Degree Program. He writes about IT and business topics that keep him up at night.

Virtual Currency: One Coin To Bring Them All

There has been a wild fluctuation lately in the value of a Bitcoin, which made me take a second look. What is Bitcoin and what is all the fuss? Why the gyrations now? In short, Bitcoin is a virtual currency that is stored and transferred digitally through an electronic wallet. There is strong encryption surrounding the wallet to ensure that only the owner can transfer or trade Bitcoins for goods, services, or other currencies.

History

Bitcoin was developed in 2009 and there are two ways that you can secure a Bitcoin (or block of Bitcoins). You can mine Bitcoins by setting your computer to the task of solving increasingly difficult math problems that assist in Bitcoin transactions. You can also buy and sell Bitcoins on currency exchanges such as MTGox. The number of Bitcoins is mathematically capped at 21 million and it is estimated that the last Bitcoin will be issued in 2140.

Currency value

What fascinates me is the potential of a new currency that is not tied to a country or state and is not regulated by a central bank, yet is tradeable and can be used for commercial transactions. There are several establishments that are beginning to accept Bitcoins for products ranging from a foot-long sandwich to college tuition to attorney services—even a future space journey aboard Richard Branson’s Virgin Galactic! The value of a Bitcoin in the United States has jumped from $13 in January of this year to currently $1,067. Part of the rise in the last two weeks can be attributed to U.S. Senate hearings around virtual currencies, which lent legitimacy to Bitcoin and others.

Competitors

There are competitors such as Peercoin, Litecoin, and Anoncoin, the latter guaranteeing anonymity by operating in the dark corners of the Internet. All of these competitors hope to cash in on the same speculation that has driven Bitcoin to its current heights. Whether people hoard virtual currencies or spend them for goods and services will be the ultimate test as to how history views them. Will virtual currencies be seen as a speculative bubble, similar to the Dutch “tulipmania,” or, if they become legitimate, a means of trading?

Thoughts

At the end of the day, a currency—virtual or fiat—is really just a medium for exchanging unlike goods and services. The lure of Bitcoin is that it is not yet regulated, it can be traded globally without international constraints, and it does not carry the 2-4 percent transaction fees of credit cards. It relies on the collective power of individual computers on the Internet to process transactions. These are the very same computers hoping to mine new Bitcoins by solving the algorithms necessary to process those transactions. In other words, a very symbiotic relationship as long as there is a lure of potential gain. It is a well thought out system and time will tell whether it becomes a new legitimate currency or succumbs to speculation. Be it Bitcoin or a competitor, I believe that this is the new norm in currency.

Do you own any Bitcoins? Would you invest in Bitcoins or use them as currency? What do you find most attractive about virtual currency? What scares you? Let me know.

Author Kelly BrownAbout Kelly Brown

Kelly Brown is an IT professional, adjunct faculty for the University of Oregon, and academic director of the UO Applied Information Management Master’s Degree Program. He writes about IT and business topics that keep him up at night.