Today's fake: Speculators pursue the Bitcoin, but ... whaaaat?

Last decade's virtual-goods mindfuck was the gold farming industry, in which American entrepreneurs went to China, hired educated but out-of-work tech grads, and put them to work for 12 to 16 hours at a time on repetitive tasks which generated virtual goods in the World of Warcraft game -- goods which could be sold for real money to game players who didn't want to put in the time and effort it took to accumulate those goods within the game. (These goods, such as a "magic sword" object, enable players to play the game at higher levels more successfully.) China made the practice illegal, but that hasn't stopped provincial prison officials from employing prisoners as gold farm slave laborers. So that's still going on.

Then there's the Zynga empire, which essentially turns all its games' players into slave laborers for the company's profit. In a way it's much simpler than the gold farming scheme, which is essentially a parasitical practice on a much larger operation (the WoW platform); Zynga simply creates an addictive product ¹ with no raw ingredients and a potentially worldwide customer base. Zynga is equivalent to a tobacco company which claims cigarette smoking isn't addictive, except it doesn't have to go to the trouble of buying raw materials, manufacturing cigarettes, and shipping them to wholesalers. It simply creates a compelling internet experience and collects an almost unlimited profit stream. It's like putting a video slot machine in everyone's home, only it's a slot machine that never pays out but simply provides its user with the mind-numbing experience of playing.

So it's one thing to create something of value out of nothing, or rather, out of electrons and human sweat. How could you go one better? How about creating nothing out of nothing, putting a value on it, and then having the unlimited greed of speculators do all the work for you? Well, it's happened. Behold the Bitcoin, a virtual currency with no meaning, no tie to any governmental or corporate entity, much less a game or virtual world. It is simply a computer algorithm (no doubt copyrighted) which permits licensees to generate units of valuation.

Bitcoins are snippets of code that use encryption to prevent counterfeiting and double-spending. Complex algorithms control the money supply, in theory replacing the need for banks or a central regulator. Right now Bitcoins can be generated -- or "mined" -- by running a program on a powerful computer. This task requires exponentially more time and processing power as the number of Bitcoins grows, and the absolute number of Bitcoins is capped at 21 million, mimicking the scarcity of gold.

Yes, you too can buy the code and generate your own Bitcoin, but notice that caveat about the "exponentially more time and processing power" needed to do so at a meaningful scale. Indeed:

One college student sustained permanent minor brain damage due to heatstroke after he dozed off in his room next to four computers furiously mining Bitcoins. "I wish I was joking," he said in a forum post that was reposted on the website BitcoinMiningAccidents.com.

Yes, there is a website devoted to "Bitcoin mining accidents"!! It's at this point you wonder what the world is coming to.

Certain cynics and libertarian critics of the monetary system -- the kind who yearn for a return to the gold standard -- would say this isn't much different from the current state of affairs in which we endow pieces of paper, some printed with "1" and others printed with "100," with value simply because we agree to. And they would also point out the similarities of limiting the total number of units of exchange and the ability to produce it. (Only the government can print money, and it controls the supply; in the same way only those holding the code for Bitcoin can generate it, and the code contains a self-limiting feature which will prevent more than a certain amount of Bitcoin to be "mined.") To them, our whole monetary system is a similar hoax.

I see this trend continuing. Last week lots of people were transfixed by the "fake lesbian bloggers," and there are still postings and articles being written on its implications for identity politics, online activism, and the whole question of online identity. At root of this issue is the question of whether or not there is substance behind what we value. The fact that Bitcoin exists and that apparently rational people are investing in it calls this into question even further.

Meanwhile, on Gawker just now: A virus that scans computers for Bitcoin and steals it.


¹ The piece on "my Farmville addiction" is not that informative, but notice the article's raison d'etre: the writer is explaining to his readers why he disappeared for two weeks. In other words, he went into a k-hole, or rather an internet hole, and didn't come out for weeks. Because he was playing Farmville. And couldn't stop.