This is the week for “revisited” blog posts.  Today: bitcoin.  In my first post about bitcoin I expressed my concern that we may be experiencing a speculative bubble that might ultimately destroy the currency’s usefulness.  Since that post, which was just last week, the $/bitcoin rate has gone from $8 to $26!  That’s already above the target estimate for the currency that I heard from one entrepreneur working on a bitcoin related business.  I ran across another link recently suggesting that were bitcoin to succeed, the ultimate value for 1 bitcoin might be around $2 million.  Obviously, those kind of numbers being out there will only fan the speculative flames.

In the meantime, it didn’t take long for governments to start paying attention to bitcoin.  Senators Schumer and Manchin wrote a letter to the AG and the head of the DEA about the use of bitcoin in conjunction with a service called SilkRoad that apparently facilitates purchases of illegal drugs.  Clearly their concern is that bitcoin might be used to facilitate illegal activity online in a way that cannot be easily shut down by serving notice to existing payment processors.

What is fascinating to me is how these questions come down to very fundamental trade-offs between individual freedoms and the desire for a civilized society.  These battles were previously fought during the emergence of the modern democracy.  We will clearly have to revisit these.