IN 1999 an 18-year-old called Shawn Fanning changed the music industry for ever. He developed a service, Napster, that allowed individuals to swap music files with one another, instead of buying pricey compact discs from record labels. Lawsuits followed and in July 2001 Napster was shut down. But the idea lives on, in the form of BitTorrent and other peer-to-peer filesharers; the Napster brand is still used by a legal music-downloading service.
The story of Napster helps to explain the excitement about Bitcoin, a digital currency, that is based on similar technology. In January a unit of Bitcoin cost around $15 (Bitcoins can be broken down to eight decimal places for small transactions). By the time The Economist went to press on April 11th, it had settled at $179, taking the value of all Bitcoins in circulation to $2 billion. Bitcoin has become one of the world’s hottest investments, a bubble inflated by social media, loose capital in search of the newest new thing and perhaps even by bank depositors unnerved by recent events in Cyprus.
Just like Napster, Bitcoin may crash but leave a lasting legacy. Indeed, the currency experienced a sharp correction on April 10th--at one point losing close to half of its value before recovering sharply (see chart on next page). Yet the price is the least interesting thing about Bitcoin, says Tony Gallippi, founder of BitPay, a firm that processes Bitcoin payments for merchants. More important is the currency’s ability to make e-commerce much easier than it is today. Full story...
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The story of Napster helps to explain the excitement about Bitcoin, a digital currency, that is based on similar technology. In January a unit of Bitcoin cost around $15 (Bitcoins can be broken down to eight decimal places for small transactions). By the time The Economist went to press on April 11th, it had settled at $179, taking the value of all Bitcoins in circulation to $2 billion. Bitcoin has become one of the world’s hottest investments, a bubble inflated by social media, loose capital in search of the newest new thing and perhaps even by bank depositors unnerved by recent events in Cyprus.
Just like Napster, Bitcoin may crash but leave a lasting legacy. Indeed, the currency experienced a sharp correction on April 10th--at one point losing close to half of its value before recovering sharply (see chart on next page). Yet the price is the least interesting thing about Bitcoin, says Tony Gallippi, founder of BitPay, a firm that processes Bitcoin payments for merchants. More important is the currency’s ability to make e-commerce much easier than it is today. Full story...
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