A nightmare called Bitcoin

Most probably I never forgot the day I met a vampire. It was daylight, clear and sunny. The vampire, who did not vanish with the light, told Socorro Velázquez and me his wanderings at night. He had a double life. In the first one, a more mundane and boring one, he worked in the technology area of a CIAT member country tax administration.

In his other life, his worked as a DJ in night clubs frequently visited by VIP people and other vampires. That other life was taking place in a world other than this one, a virtual world called Second Life. For his work as a DJ he received tips from participants. The tips were in virtual money. With virtual money you could buy virtual goods and services, for example: “virtual blood for virtual vampires”.

Anyone who has already played monopoly can easily imagine that, within the game, there are lots, houses and hotels, which are purchased, rented and sold with “fake money” administered by a bank. It is just a game. Although some cards make you lose a turn or inform you that: “the tax auditor passed here, you must pay 200” no one would think that a tax administration should worry for those gains; not even when someone who had bought a property for 100 sold it later for 200. At least once someone could have exchanged a real chocolate for money in order to buy a hotel. Also sometimes the prettiest girl of the group manages to not pay the rent in exchange for an innocent kiss on the cheek, but that’s something else.

Later I discovered that often, as in the chocolate story, the money in Second Life, called Linden Dollar, could be used to obtain non-virtual goods and services. On the other hand, it is common that in several games, money from this world could buy virtual money to play or play more in that playful world. But well, these are games; it is not a serious issue.

But what would happen if the following questions are answered with a resounding yes: Do people buy and sell goods and provide virtual services? And what if they have significant gains in virtual money? And what if they buy and sell real goods and services with fake money? And if they simply change virtual money for real money at a rate established by the market so that the profits from the virtual world become profits in the real world?

And what if there are thousands or millions of vampires doing the same and a provider of virtual blood or something else actually making a lot of real money? Well, then someone will say: profits, once converted into real money are profits. I wonder if someone is already thinking about a virtual VAT, anyway, if it becomes a problem, it is necessary to control and we must speak with the game manager to obtain the information on the account. At the end there should be a “middleman” who certifies that this virtual money exists and was not invented or falsified, and that a user in the virtual world can be related to an account from a person of this world. The administrator registers transactions which made possible for this money to be transferred and acts as a bank centralizing transactions. On the other hand, without that middleman, would it be possible to issue inorganic virtual money? If anyone could invent money in unlimited amounts, it is clear that in the long run it would have no value, whether real or virtual. It would not be anything like real gold since it would be too easy to get.

But what if that administrator does not exist and yet this virtual “currency” seems somehow similar to real gold and its transactions can be completely anonymous? And if people or at least many people agree that it has real value? Then the transactions with this “currency” would be similar to cash transactions elusive to the tax administration. But, unlike cash, it is a currency that can easily cross borders easily without daily operational limits.

Well, Bitcoin is precisely something like that.  A virtual currency, which conversion rate to real currency grew 50 times in one year and I will comment a bit more about it in the following Post.

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