What’s a Bitcoin?

I’m sure some of you, like me, are still trying to figure out what a “Bitcoin” is.  For those who already know, you can skip this blog entry and get back to reading about Justin Bieber.

My good friend, Ralph, tried to explain it to me about a month ago.  I nearly swerved off the road when I began to doze off about halfway through his dissertation.  I swore I would look it up on the web when I got home but, as happens more often than not these days, I forgot.

The current turmoil in the Bitcoin world renewed my interest in knowing more about it.  Especially when I saw prominent Bitcoin entrepreneur, Mark Karpeles, trying to apologize to a bunch of Japanese investors for his role in the debacle.  And he was doing it in Japanese…which didn’t help explain anything to me.  He also looked a lot like my grandson, which didn’t do much to instill great confidence in his supposed financial acumen.

I vowed to learn more.  So I Googled “Bitcoin” and this is what appeared as the first entry… Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name.  Pretty simple, I thought.  But hardly a confidence builder.  And then I thought, so why didn’t I think of that?

My appetite whetted, I searched for more information about Bitcoins.  I went to my go-to site, Wikipedia, that’s always given me the straight scoop.  I got as far as…Bitcoin is a payment system using a public ledger and a digital currency created by open source software.  That’s when I decided that my cup runneth over.  The one thing that did stick with me was that there is no metal, paper or plastic associated with Bitcoin.  It’s all digital, as in zeros and ones.

Given the absence of anything tangible like hard currency, bearer bonds or gold bullion, I wondered how Forbes magazine could report…Karpeles says he is working hard with technical teams to solve a major security issue, which forced an operational shutdown at the company.  Some 744,408 Bitcoins, worth over $350 million, were allegedly lost or stolen, owing to a technical problem.  How can someone steal something that you can’t see or feel?  And doesn’t he have a User Support desk?

Those coins must be somewhere, musn’t they?  After all, if the stolen 744,408 Bitcoins were worth $350 million, that means that each one was worth $470.  That’s an awful lot for something that you can’t put in your pocket or lose under the couch.  I bet there isn’t even a picture of one.

But there’s a bit of good news for Mr. Karpeles.  At the beginning of 2011 when he first starting messing around with Bitcoins, each one was worth only 92 cents.  At the end of last year, each of the little electronic marvels had risen in value to $1,147.  That’s pretty good for something that really doesn’t exist.  If Mr. Karpeles’ technical problem had occurred two months ago, his loss would have been nearly a billion dollars instead of a less gut wrenching $350 million.  Lucky man.

When I was in business back in the dark ages, lots of entrepreneurs would sit in my office trying to involve me in their latest and greatest computer applications.  I’d listen closely.  More often than not, my eyes would glaze over as I’d try to fathom what they were promoting.  If I had to struggle to understand their magic, I’d say “thank you, but I’m obviously not the person you thought I was.”  It served me well.

Here’s an idea for Mr. Karpeles.  In order to recover your 744,408 Bitcoins, maybe you should just re-boot your computer and clear your cache.  But that’s just one more thing that I’ve never understood.