Then America woke up — and went from novice to expert to blasé on the topic.
Step 1: What is Bitcoin?
People who'd never heard of Bitcoin before started exploring the existing literature. Bustillos' piece, for example, or, perhaps, one of our previous stories. Or through this article, passed around this morning, which analogizes Bitcoins to the giant circular stones once used as currency on the island of Yap.
In Bitcoin, instead of expending manual labour to find a kind of stone that is rare, we expend computing power to find sets of numbers that are rare. These sets of numbers have a particular mathematical property that makes them difficult to find but once you have found them it is easy to check that they have that property, just as the Islanders could easily check that your disk was made from the rare limestone from Palau. Once you (or rather, your computer) has found one of these numbers then it is yours and you can keep it or trade it.
Later in the day, people learned what bitcoins can buy you from BuzzFeed (coffee, ribs, a trip to the veterinarian) and Business Insider (a Porsche, which went for 300 bitcoins).
Step 2: Where does one get a bitcoin?
(Step 2a: How should we type Bitcoin? "Bitcoin," with a capital B, is the system; "bitcoin," with a lowercase B, is the currency.)
Because Bitcoin is predicated on anonymity, you can't buy bitcoins with a credit card online. Kevin Roose at New York walked through the process of buying the currency, which ended up yielding 0.93523120 of a bitcoin and involved handing over cash at a CVS.
I picked up the red phone and was connected with a Moneygram representative. She asked for some basic information about whom I was trying to pay (ZipZap) and how much I was trying to pay them ($133.95). I gave her the information BitInstant had given me, and she confirmed my transfer. Now the only remaining step was to give the CVS cashier $133.95, as if I were buying a really expensive pack of razors.
This is, apparently, the brave new world of international economics. Give cash to someone at a pharmacy, get ready to buy 1/300th of a Porsche.
Step 3: What are the economics of Bitcoins?
As the day progressed, more detailed explorations of the system emerged. Reuters' Felix Salmon wrote a lengthy post on the newish platform Medium articulating the economics behind the system, making very clear in the third sentence of the first paragraph what he thought about it: "[W]e’re in the middle of a bitcoin bubble right now, and it’s only a matter of time before the bubble bursts."
Image from Felix Salmon.
There are a couple of reasons why the bubble is sure to burst. The first is just that it’s a bubble, and any chart which looks like the one at the top of this post [Ed. – See above] is bound to end in tears at some point. But there’s a deeper reason, too — which is that bitcoins are an uncomfortable combination of commodity and currency. The commodity value of bitcoins is rooted in their currency value, but the more of a commodity they become, the less useful they are as a currency.
By mid-afternoon, someone else had written an also-long rebuttal.