Bitcoin, Bernanke, and My Lunch Money — Guest Blogger, Erik Voorhees

While far from mainstream, those who lurk the interwebs have been hearing about Bitcoin. As a weird, cryptographic, peer-to-peer currency, many observers view the phenomenon with a healthy degree of skepticism. What’s it backed by? What’s it used for? How can I trust it? Good questions, all.

Yet while skepticism is warranted, fans of liberty and commerce (redundant terms) might be intensely intrigued by this new currency. For those of us who think free markets should apply to money just as every other commodity, Bitcoin is like an AI-inspired technology out of a sci-fi fantasy novel. But it’s here, it’s real, and it works.

After persevering through a hurricane (too soon??) of negative publicity, corporate scandal, and price volatility this summer, Bitcoin enjoyed its first small-but-focused international conference in Manhattan in mid-August. I was fortunate enough to attend this event, and meet face to face (instead of keyboard to keyboard) with the movers and shakers. Yet amidst exciting new business ventures, technical study and collaboration, and grand discussion of subverting the Federal Reserve over one too many drinks at a Manhattan rooftop lounge, my favorite moment was the mere Saturday lunchtime purchase of a hummus Greek wrap.

You see, for all the Bitcoin chatter about monetary theory, governments vs. liberty, profound technical innovations and scary security concerns, most people care little for money but to the extent they can purchase their food. And I did just this. It was one small step for hunger, and one giant leap for mankind.

At Meze Grill, in midtown Manhattan, I approached the cashier with my meal. I told him I’d be paying in Bitcoin, if that was alright with him. He smiled, looked at the register, and said, “that’ll be .87, please.” And doesn’t .87 sound more appropriate for the price of lunch, anyway? Such a price might be familiar to our grandparents, and indeed it’s much more sensible!

So, I pulled out my Android phone, scanned the square QR code in front of the register, typed “.87″ into my Bitcoin app and pressed the “send” button. My Bitcoin balance fell from 4.90 to 4.03 (the coins stored on the phone itself). A signal was sent to a cell tower, then a satellite. An international peer-to-peer network of private nodes conveyed the payment. Bitcoin software in Russia, Australia, Omaha, and Abu Dhabi all saw the transaction and forwarded it on.  Two seconds passed, and the cashier said, “thank you!” I took my food and let me tell you, everything tastes better without Federal Reserve sauce.

Now, don’t get me wrong, I love me some gold and silver. But such a lunch would not have been so rewarding with bullion. Obviously, nobody wants to carry heavy metal coins around, and in what denomination?  My meal was about 1/4 ounce of silver in price, but not exactly, so either myself or the restaurant would be out the difference. Certainly we could all have silver held at banks, and pay with debit cards that deducted perfect quantities for our purchases, but then we have to trust that bank, and if the bank doesn’t approve of this lunch, it could prevent the purchase. Plus, fees suck.

Paying with Bitcoin, there was no third party. It was a private transaction between myself and the restaurant, and no institution, no matter how powerful, could’ve prevented the money transfer without physically restraining me from pressing the send button. I prudently looked over my shoulder for the SWAT team, but remember, until I announced the transaction in this article, it was unknown to the world — the payment going from one of my private Bitcoin accounts to one of Meze Grill’s private Bitcoin accounts. It’s almost like, dare I say, a free market. Apparently they do work.

Compare this with a typical credit card transaction, where both the merchant and customer must be documented well in advance, their personal details stored at the bank, prone to hackers and—even worse— to governments, the record of every transaction kept in perpetuity, and the bank (or the Feds via the bank) possessing the immoral ability to halt any transfer. Wikileaks, of course, has now started accepting Bitcoin for this very reason.

So I could chat about the other exciting developments in Bitcoin Land. I could discuss the open-source point-of-sale system made by some dude in his bedroom (http://bit.ly/qm72Nv). I could mention the new exchanges popping up in countries all over the world (Mercado Bitcoin in Brazil, World Bitcoin Exchange in Australia, TradeHill now in India, or Ruxum trading for Swiss francs). Perhaps I could name some of the new InTrade-esque event prediction markets, the Strike Sapphire casino, or the Global Bitcoin Stock Exchange (GLBSE). Maybe having access to over a million consumer items at BitcoinDeals.com would excite some people. All these are pretty cool, but the purchase of lunch in Manhattan has me most enamored.

To those who have doubts about Bitcoin, fair enough (it’s new and weird), but to not see the possible revolution here you must be sleeping. Bernanke is not going to be happy if this catches on, I’ll bet my lunch money on it.

Erik Voorhees is an entrepreneur and liberty enthusiast whose writing can be found on Lewrockwell.com. Also involved in the Free State Project, Erik is a “new mover” with writing skills to boot. Follow him on Twitter for 140 witty characters