Daily Times

When virtual currency token Bitcoin splashed on to the international scene almost a decade ago, it caused not only a stir but also gave birth to an enigma. Who was this person or groups of persons going by the name Satoshi Nakamoto, everyone wanted to know. Why did this creator opt to only communicate to the outside world by way of email or social media messaging? And what made him disappear from view some two years after releasing his software back in 2009?

Bitcoin has over a period time has minted quite a few (USD) millionaires. Such as the Winklevoss twins who sued MarkZuckerberg over allegations that the latter stole their original idea for a borderless social networking site that went on to become Facebook. Indeed the former Olympic rowers became even more famous when they used part of the $65-million settlement to load up on Bitcoin; making them the first prominent virtual currency millionaires. Up until then, this digitised monetary system was largely preferred by those wishing to make non-traceable payments, such as those engaged the drug trade or else the larger criminal underworld. But since 2013, the time of their initial investment, the Winklevoss twins’ combined Bitcoin net worth has skyrocketed to around $1.3 billion. And like most who have literally profited from this virtual currency – it is because they have been hoarding their stockpiles from the outset. This is because, being a decentralised commodity, Bitcoin has proved to extremely volatile when it comes to market regulation. Indeed, the faceless Satoshi Nakamoto is now believed to be sitting on a fortune worth a staggering $19.4 billion; sufficient to give ‘him’a ranking of 44 on the Forbes’ list of the world’s richest people.

International money markets have long wanted to put a face to the ever elusive Satoshi Nakamoto. Many have speculated that this public-yet-invisible persona must, in reality, be a group of some sort. Especially considering Bitcoin’s complex software coding. Nevertheless, the anonymity of the creator, the ease of conducting transactions, with neither government involvement nor any system of checks-and-balances, means that it remains of interest to those wishing to pay for goods or else move vast sums of money across international borders. After all, it just takes a few minutes to move Bitcoins worth millions of dollars; whereas the same process when it comes to traditional mechanisms, such as banks, can take weeks. This is not to mention additional costs in terms of transfer fees or exchange rate cuts.

The lure of Bitcoin is that it requires no government involvement to move vast sums of money across international borders. Yet this absence of state control might well make it a risk in the long term

Many Bitcoin millionaires are already – literally-cashing in and buying luxurious commodities with their new found wealth. Whereas others, such as the Winklevoss twins, are holding onto their virtual stockpile. Yet since its launch, speculators have tended to invest in the virtual currency to win back immense profits and up until now their gamble has paid off. But the question remains: for how long?

That there is no government to back the currency might well make it a risk in the long-term. Meaning that someone somewhere could quite possibly come up with an even more lucrative model – thereby bursting the Bitcoin bubble. If I were inclined to make comparisons I would pick social networking sites such as Orkut and MySpace; while being mindful that these don’t correlate exactly. But be that as it may, the introduction of Facebook has more or less killed traffic to the aforementioned. And it is not entirely inconceivable that the latter might one day suffer the same fate. After all, there is always someone out there who is one step ahead; a veritable geniusin the making who changes the way in which we virtually interact with others. Thus the same may be said when it comes to virtual currency operations.

If those who have either cashed in their virtual chips or who remain sitting pretty on them – what if they suddenly stopped trading in Bitcoins? Or if someone managed to come up with a vastly less market-volatile virtual currency? A currency that allows even a layman – meaning someone with less know-how than Bitcoin requires – to open up an account and make it operational for either day-to-day transactions or in which he can ‘deposit’ his hard earned ‘cash’.

Honestly speaking, therefore, I will have to come clean and confess that, for me, Bitcoin is nothing more than one big bluff. In other words, I believe it could one day just give up the ghost rather like the social networking sites of yesteryear; or, indeed, now the anachronistic home film rental service that market leader Blockbuster Video was known fir throughout the 1990s. All we can do is wait and see.

The writer is a corporate lawyer and an alumnus of SOAS, University of London. He can be reached at sami@samishahpartners.com

Published in Daily Times, December 24^th 2017.