Let's say that you were a computer programmer who wrote some code and convinced a bunch of people that your software could serve as a currency unaligned with any government.
According to Wikipedia, this is how bitcoin was formed. In 2009, a developer named Satashi Nakamoto introduced this "cryptocurrency" to the world. We're not exactly sure what void Nakamoto was trying to fill, but he apparently has attracted a lot of investors, companies accepting it for payment, and speculators.
Now, the bitcoin website itself (bitcoin.org) has some warnings under things you need to know. In fact, it has so many that the list reads like a list of the disclaimers you hear every night in drug company commercials. Among them are:
* Bitcoin price is volatile - there has been a lot of speculation in the currency and the price of a single bitcoin has swung violently. It has been as high as $1,170. Wednesday it climbed from $664 to around $720.
* Bitcoin payments are irreversible - the only way you can get your money back if you are dissatisfied with a transaction is to convince the guy who accepted your bitcoin as payment to give it back to you.
* Instant transactions are less secure - the site says dishonest users may try to cheat.
* Bitcoin is still experimental - the cryptocurrency is still in active development.
Last week, a very large exchange - Tokyo-based Mt. Gox - announced it was the victim in a $460 million heist of bitcoins by hackers and it was filing for bankruptcy.
In light of this revelation, it is amazing that the bitcoin is still trading in the $600-$700 range.
Undoubtedly, we are ill-informed about the attractions of "cryptocurrency." But super investor Warren Buffett has said he wouldn't be surprised if bitcoin wasn't around in the next decade or two.
Why are so many enthralled by this software? Why are so many willing to risk a bet on a currency not backed by any government?
* Editorials reflect the opinion of the publisher.