In 2009, Bitcoin became the first-ever digital currency. Last month, a competitor called Dogecoin launched. In the last 24 hours, eBay/Paypal, Kanye West and Ron Paul have now suggested they would create their own forms of online currency, as well.
While Bitcoin, Dogecoin and RonPaulCoin (yes, its actually called RonPaulCoin) are currently being used as a real forms of currency, other entities like Kanye and eBay are trying to use online currencies merely payment processing systems. In short, they intend customers to use their unique digital currencies like store credit.
Despite the attention company specific digital currencies have been getting in the news over the last two weeks, they’re anything but new. In 2012 Amazon created Amazon Coins. And before that, Facebook created Facebook Credits (remember those?) At popular online greeting company Paperless Post, if you want to send any non-free cards and invites, you must first buy Paperless Post “Coins.”
The explosion of online currencies as of late, however, begs the question: Are digital currencies just a passing fad?
For global currencies like Bitcoin that have real, monetary value, the answer is definitively no. The worldwide financial crisis has cemented these types of digital currencies as an alternative to traditional, fiat (paper) currencies. It’s frankly surprising Libertarian and Ron Paul-types haven’t successfully created their own currency before, given their detestation for the Federal Reserve (End the Fed!) and affinity for a return to the gold standard.
I would be astonished, however, if organizational online currencies drew much attention beyond 2014. The notion of having to go to a business online and convert money into a special currency before buying something defeats the purpose of common currency. It’s also also inconvenient. Businesses, including PayPal, seeking to create their own currencies ignore why PayPal is so successful. PayPal allows users to pay for products across businesses at the click of a button. No more having to pull your credit card out every time you need to engage in ecommerce – just hit the PayPal button, put in your password, confirm the purchase and you’re done.
With an ever increasing amount of commerce taking place online, individual, digital currencies do not seem viable in the long-term unless they become widely accepted forms of alternative currency. Bitcoin is on its way to falling into that category, as more and more major businesses and organizations begin to accept it as a form of payment. Unfortunately for potential competitors to Bitcoin, the virtual currency may also be on its way to creating a monopoly within the market.
But have no fear Ron Paul supporters, even if your digital currency doesn’t survive in the oh-so-cruel free market, you may yet be able to get Bitcoins made partially out of gold. A return to the gold standard may be imminent, indeed.