While I don’t agree with Paul Krugman’s Bitcoin is Evil post from the weekend, his next post on Bitcoin did include this nugget I had never considered:
It occurs to me that part of the disconnect is that Bitcoin solved a major technical problem, one that people had been thinking about for about 20 years, and we nerds just can’t believe that it doesn’t also solve an economic problem. The technical problem is double spending–if I have some digital money, it’s easy enough to verify cryptographically that it’s real, but if I give it to you, how can you tell that I haven’t also given it to someone else? Until Bitcoin, the answer was to have a bank that knew which coins were valid, so you’d present my coin to the bank, which would check its database and if it’s valid, cancel it and give you a new one. Bitcoin has its decentralized blockchain which is a very clever recasting of the problem so that the state of the “bank” is whatever the majority of bitcoin miners agree that it is. Getting enough of the miners to agree is known as the Byzantine Generals problem, and has a technical history of its own.
As simple as it seems, splitting out the technical achievement from the economic one is a really interesting way to think about it. I haven’t really spent enough time thinking about Bitcoin to have a strong opinion about it specifically, but I do think the idea of a crypto-currency not attached to a specific nation is something bound to happen. In a way, I feel like Bitcoin and Google Glass have a lot in common: Early experiments in form and style that signal what’s to come.