A lot of my friends lately have been showing a keen interest in virtual currencies and my defacto response is that it is following a typical bubble pattern. I do think that the speculation on and proliferation of bitcoin and its variants is a dangerous short-term trend, but I also believe that there is a lot of enticing aspects of virtual currency.
One of the more fascinating aspects is the underlying blockchain technology that distributes the currency’s ledger across many machines; essentially decentralizing tracking ownership and allowing instantaneous reconciliation. The problem this poses for a government with a strong currency is evident in that they will lose control over the currency unless they start building their own variants. Today in the NYT, there was this article outlining some thoughts Venezuela and Russia are having at creating their own.
Unfortunately, their reasons are to skirt international pressure on them to change their behavior. The United States really needs to be on the forefront of this technology and needs to start passing laws that will allow blockchain technologies to grow healthily and with government oversight. At this point in time with the current administration’s disdain for regulation I doubt this will be possible.