Last month, I suggested that one problem with Bitcoin is that anyone can set up an alternative currency similar to it, and there is no practical obstacle to people switching over.
By comparison, there are lots of practical obstacles to switching from other currencies. If, say, you decided one day to stop using US dollars and do all your business in Japanese Yen — and you’re based in the United States — you would have a lot of problems. All your US-based vendors and customers would either have to pay currency conversion costs, or stop doing business with you, and you’d have problems paying your taxes and government fees and utility bills and a whole bunch of other stuff. Similarly, if you had a lot invested in a corporate-backed virtual currency, such as a store gift card or iTunes credits or Linden dollars, you might have to sell them at a discount to get rid of them, and you might lose access to that particular marketplace.
So, if something came along that was just like Bitcoin but sexier, what would keep folks from switching over? Especially if, with the new currency, they got in early enough so that they’d be able to mine it, or buy it on the cheap.
I was thinking of something like Biebercoin.
But it turns out that reality is even stranger!
Did I mention it was a joke?
Well, that joke is, as of this writing, worth US $7.4 million.
The technology and algorithms behind these cryptocurrencies is open source. So if you like a particular type — Litecoin, for example, an improved version of Bitcoin — you can easily make a clone of it, attach it to whatever the latest hot thing is, and release it into the wild.
I just didn’t expect it to be based on a dog-related Internet meme.