unclear why bitcoin should be a stable store of value." Joining in the dis- when it will wind down to zero. So, starting in 2140, no more bitcoins will cussion, Charlie Stross, the British writer of science fiction, says "bit-be added into virtual circulation and they will have reached their maximum coin looks like it was designed as a weapon intended to damage central of 21 million. Perhaps most people will not worry about the year 2140 just banking and money issuing banks, with a Libertarian political agenda in yet, but does mean that there is, technically, a finite supply of bitcoins. mind—to damage states' ability to collect tax and monitor their citizens' Such a finite number has the potential to adversely affect the value of bit- financial transactions." coins. Economist John Quiggin argues that this has resulted in "the finest What is the difference between bitcoin and normal currency, such as example of a pure bubble." the U.S. dollar? Bitcoin is an unregulated peer-to-peer digital currency that Perhaps more remarkably, bitcoins do not have any real value per se is not backed by any other commodity such as gold or silver. Bitcoins exist (cf. gold, silver), which means that the coin's value depends on classical almost entirely in the digital online world, although some bitcoins have demand-and-supply economics, leading many financial experts to liken actually been privately minted. The U.S. dollar, like many other stable cur- bitcoins to a Ponzi scheme, similar to Krugman's viewpoint. A Ponzi rencies, are paper or coin currency issued by a national reserve-type bank scheme is a fraudulent investment operation that returns payment to its (in the United States, it is the Federal Reserve Bank). This means that dol- investors from capital paid by new investors rather than from profit earned lars are really Federal Reserve Notes that are printed or minted at the U.S. (Charles Ponzi was born in Italy but became known in the early 1920s as a Bureau of Engraving and Printing. The dollar is so-called fiat money, which swindler in North America for his unusual money-making scheme). means that dollars derive their value from the U.S. government regulation Bitcoins have also been the subject of scrutiny by various governments or law. Interestingly, the United States decided in 2014 that bitcoins will be because of concerns that they can be used for illegal activities. Some say taxed as property, not currency, for International Revenue Services (IRS) the cryptocurrency is unethical because it is allegedly used to buy illegal purposes. The IRS defined bitcoin as a "convertible currency that can be drugs and guns and to pay for other illegal activities. Additionally, given its used as a medium of exchange, a unit of account, and/or a store of value." unique code, once stolen, bitcoins cannot be returned, and there is no cen- Technically, Bitcoin with a capitalized "B" refers to the technology and tral bank or agency that can help catch thieves. But, bitcoins have also network associated with the currency, while bitcoin with a lower case "b" attacked the cost of moving money around and have successfully created refers to the actual currency. The philosophy underlying the bitcoin is a simple measure of value that can be very efficiently moved around at complete mistrust in authority or control-basically a perfectly stateless, virtually no cost. market-based approach, with no country or region-level bank interven- Sources: P.Krugman, "Bitcoin Is Evil," The New York Times, December 28, 2013; U. tion. It is also very technical. Bitcoins are generated through a process Goyal, "Bitcoin and the Future of Money," Informilo, June 5, 2013; and D. Leger, called "mining." The mining process involves adding transaction records "IRS: Bitcoin Is Not a Currency." USA Today, March 25, 2014. to bitcoin's public ledger of past transactions, which is called the block CASE DISCUSSION QUESTIONS chain (i.e., a chain of blocks). Bitcoin nodes use the block chain to identify legitimate bitcoin transactions. Even in today's high-tech world, the min- 1. Do you think bitcoins are approaching being unethical monetary ing process is intentionally designed to be resource-intensive and diffi- instruments without technically carrying a value similar to "real" cult. This means that the number of blocks found daily by miners remains money? relatively steady. So, basically, in order to "mine" a bitcoin, a person has 2. If bitcoins are used to buy drugs, firearms, or other products that are to solve a complex mathematical problem using substantial computa- considered illegal in the country in which the bitcoins are being used, tional power. There's a twofold reason for this: It controls the supply of does that make bitcoins unethical? bitcoins and incentivizes people to maintain the underlying infrastructure 3. Do you think the bitcoin system is "evil" as Paul Krugman suggests? that keeps bitcoins in place. Is it similar to a Ponzi scheme? A unique feature of the bitcoin is that the number of new bitcoins that 4. Do you think that bitcoins were created as a weapon intended to are created is intentionally halved every four years until the year 2140, damage central banking and money-issuing banks? r Endnotes 1. Toy Industry Association Inc. and the NPD Group, 2012. www.toyassociation.org, accessed March 8, 2014. 2. T. Hult, "Market-Focused Sustainability: Market Orientation Plus!" Journal of the Academy of Marketing Science, 39, pp. 1-6, 2011; and T. Hult, J. Mena, O. C. Ferrell, and L. Ferrell, "Stakeholder Marketing: A Definition and Conceptual Framework," AMS Review, 1 (2011), pp. 44-65. 3. S. Greenhouse, “Nike Shoe Plant in Vietnam Is Called Un- safe for Workers," The New York Times, November 8, 1997; and V. Dobnik, "Chinese Workers Abused Making Nikes, Reeboks," Seattle Times, September 21, 1997, p. A4. 4. R. K. Massie, Loosing the Bonds: The United States and South Africa in the Apartheid Years (New York: Doubleday, 1997). 5. Not everyone agrees that the divestment trend had much in- fluence on the South African economy. For a counterview sce S. H. Teoh, I. Welch, and C. P. Wazzan, "The Effect of So- cially Activist Investing on the Financial Markets: Evidence from South Africa," The Journal of Business 72, no. 1 (January 1999), pp. 35-60. 6. Peter Singer, One World: The Ethics of Globalization (New Haven, CT: Yale University Press, 2002). Chapter Five Ethics, Corporate Social Responsibility, and Sustainability 155 CASE DISCUSSION QUESTIONS 1. Do you think bitcoins are approaching being unethical monetary instruments without technically carrying a value similar to "real" money? 2. If bitcoins are used to buy drugs, firearms, or other products that are considered illegal in the country in which the bitcoins are being used, does that make bitcoins unethical? 3. Do you think the bitcoin system is "evil" as Paul Krugman suggests? Is it similar to a Ponzi scheme? 4. Do you think that bitcoins were created as a weapon intended to damage central banking and money-issuing banks?
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