Bitcoin 'a distraction', says online payment pioneer

Security researcher Sergio Demian Lerner estimates that Satoshi - the pseudonymous creator of the currency, mined around 1,000,000BTC in the early days, but has never spent any. At a price of around $400 each, that would make him worth around $400 million.

Libertarians have some good points. I certainly believe that people should have as much liberty and freedom to choose and freedom to act as is possible, while compatible with a society that is in other ways fair and functional. But the notion that they can free currency from governments is really misguided. One of the few functions of government that I thought was unassailable was providing a stable currency.

What is a stable currency? It used to be a currency that was either made up of or backed by gold or silver. In modern era its more a currency thats backed by the full faith and credit of the government. Bitcoin is backed by the full faith and credit of wasted computer time.

Wasted computer time. Its like stock in a company that doesnt do anything. One of these totally speculative IPOs. Its a promise. I think its a distraction.

I think the enthusiasm for Bitcoin will, if were lucky, will help us make some progress towards a more rational digital currency. Ultimately the providers of those currencies are probably going to be governments.

Borenstein awknoledges that many people have made their fortunes on the huge price fluctuations seen by Bitcoin in recent years, he says it is nothing more concrete than the tulip bubble seen in the Netherlands around 1637. In March that year a single bulb of one species of tulip was being traded for around ten times the income of the average skilled craftsman.

"I have no doubt that not only have people made a fortune on Bitcoins, but some people in the fortune will make a fortune on Bitcoins, because it's a speculation. Some people will lose a fortune. At the level of an investment it may be a little more than tulips but on the level of a technological indicator it may be a pointer towards a multi-currency digital future," he said.

First Virtual took initial funding, including from established firms like GE Capital, and floated in a 1996 IPO. It was later bought out by DoubleClick in the dot com crash.

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Bitcoin 'a distraction', says online payment pioneer