Dollar for Dollar: Bitcoin Hits Parity

This week, a digital currency with no issuer and no government reached one dollar for the first time. On Wednesday, February 9, one bitcoin traded for one dollar on Mt. Gox, and the milestone was celebrated across the forums and blogs of the believers. The price had climbed from roughly thirty cents in late 2010. The currency was the creation of an anonymous developer, Satoshi Nakamoto, a name known and an identity unknown. The moment is the February 2011 story, and the story is the lesson: value does not need a government, and the internet's currency grows up quietly, one dollar at a time.

The Parity is the subject of this article: what the dollar means for a currency that began as an experiment, and why the believers and the doubters watch the same small system. The story is told on Thursday, the day after the milestone, from the moment itself.

1. The Parity

The parity was the milestone, and the milestone was the number. One bitcoin, one dollar, the first time the two had ever met at the same price, on Wednesday, February 9, on the Mt. Gox exchange. The number was round, the number was symbolic, and the number was also an accident of arithmetic: the price had climbed from roughly thirty cents in late 2010, and the climb had finally reached the place where the coin and the currency of the United States stood level. The forums lit up, the blogs lit up, and the celebration was the point of the day.

The parity was the proof, and the proof was the price. The believers had said the currency would find its value, and here was the value, written in dollars on a screen. The doubters had said the currency was nothing, and here was the nothing, trading at the same number as the dollar. The number was small and the market was tiny, and the meaning was large: a currency with no issuer and no government had been priced by the world, and the world had said one dollar. The celebration on Wednesday was the sound of a system taken seriously for the first time.

2. The Journey

The journey was the history, and the history was the patience. Bitcoin launched on January 3, 2009, with the genesis block, the first block, and for a long time the coins had no price at all. The hobbyists mined them on ordinary computers, the coins accumulated in wallets, and the value was whatever the miners imagined it to be. The first informal valuations came in October 2009, when a small service called New Liberty Standard put a number on the coin, and the number was a fraction of a cent. The journey from that fraction to the dollar took sixteen months.

The journey had its landmarks, and the landmarks were the steps. On May 22, 2010, a programmer paid ten thousand bitcoins for two pizzas, the first famous purchase in the currency's history, and the purchase was the proof that the coins could buy real things. In July 2010, the first real exchange, Mt. Gox, opened its doors. The exchange was crude, the volume was thin, and the ecosystem was tiny, a few tens of thousands of users, but the exchange was the bridge between the coins and the dollars. The journey crossed the bridge, and the bridge led to the parity.

3. The Design

The design was the foundation, and the foundation was the scarcity. The currency was created by an anonymous developer, Satoshi Nakamoto, a name known and an identity unknown, and the design was fixed from the beginning: the supply would never exceed twenty one million coins, the reward for mining a block would be fifty coins, and the reward would be cut in half every two hundred ten thousand blocks. The scarcity was the promise, and the promise was the value: no government could print more bitcoins, no central bank could devalue the holders, and no bailout could dilute the supply.

The design was also the accessibility, and the accessibility was the democracy. The coins were mined on ordinary computers, and the mining was the mechanism that secured the network: the miners competed to solve puzzles, the winner added the next block, and the winner was paid in the new coins. The design meant that anyone with a computer could participate, anyone could hold the currency, and anyone could verify the history. The design was the opposite of the banking system: no vaults, no accounts, no clerks, and no permission. The design was the argument, and the argument was the alternative.

4. The Exchange

The exchange was the market, and the market was the mirror. Mt. Gox opened in July 2010, the first real exchange for the currency, and the opening was the moment the coins met the dollars in a public place. The exchange was crude, the software was rough, and the experience was not for the faint of heart, but the exchange was where the price was made. Before Mt. Gox, the coins had no agreed price; after Mt. Gox, the coins had a number that anyone could see, a number that moved, and a number that the believers watched like a heartbeat.

The exchange was also the fragility, and the fragility was the truth. The market was tiny, the users numbered a few tens of thousands, and the whole economy could fit inside a single website. The believers knew the fragility, and the believers accepted it: the exchange was the best that existed, and the best was enough for the beginning. The parity was reached on the exchange, the number was printed on the exchange, and the exchange was the witness to the milestone. The market was the mirror of the currency, and the mirror showed a small, rough, and suddenly real economy.

5. The Believers

The believers were the community, and the community was the fuel. The milestone on Wednesday was celebrated across the forums and blogs, the places where the currency had grown up, and the celebration was the sound of vindication. The enthusiasts had called the currency digital gold, and the believers had held their coins through the months of no price, through the fractions of a cent, and through the ridicule of the outside world. The parity was the proof they had been waiting for, and the proof was written in the currency they had believed in first, and the believing was the beginning.

The believers were also the narrative, and the narrative was the moment. In the tech circles where the currency was watched, the story of the week was the story of the internet's currency growing up, and the growing up was the headline. The currency was the creation of an anonymous developer, and the anonymity was part of the romance: the money belonged to no one and to everyone, the money answered to no state and to no bank, and the money was the property of the network that ran it. The believers saw the future in the parity, and the future was the point.

6. The Doubters

The doubters were the chorus, and the chorus was the counterweight. The economists called the currency a toy, a bubble, and a Ponzi scheme, and the names were thrown with the confidence of people who had seen manias. The currency had no issuer, no government, no backing, and no promise of redemption, and the absence of the backing was the argument against it. The doubters pointed at the crude exchange, the tiny ecosystem, and the anonymity of the creator, and the pointing was the pattern: everything that the believers loved, the doubters feared, and the fearing was the skepticism of the week.

The doubters were also the test, and the test was the honesty. The questions were fair: a currency with no value behind it except belief, an exchange with no regulation, and a market where a few tens of thousands of users could move the price of everything. The economists said the parity was a curiosity, not a currency, and the curiosity would fade. The believers answered with the design: the fixed supply, the mining on ordinary computers, and the network that no one controlled. The doubters heard the answer and were not convinced. The argument was the debate, and the debate was the week.

7. The Question

The question was the future, and the future was the unknown. On Thursday, the day after the milestone, the question hung over the forums and the blogs: what comes after the dollar? The believers said the dollar was a floor, not a ceiling, and the believers pointed at the design as the reason: the supply was fixed, the demand was growing, and the scarcity was the engine. The doubters said the dollar was the top of the joke, and the punchline would be the collapse. Both sides were certain, and both sides were guessing, and the guessing was the question.

The question was also the meaning, and the meaning was the money. The parity asked what money is, and the asking was the radical part: money without a state, money without a bank, money without a face. The currency was two years old, the users were few, the exchange was crude, and the value was one dollar. The believers said the beginning was the point; the doubters said it was all there would ever be. The question on Thursday was not whether the dollar would hold, and the question was whether the idea would survive the doubt, and the surviving was the story ahead.

8. The Lesson

The lesson of the parity was about the origin of value, and the origin was the belief. The dollar reached was not decreed by a government, not printed by a bank, and not backed by gold; the dollar was reached because people agreed that the coins were worth something, and the agreement was the currency. The first informal valuations came in October 2009, the first famous purchase came in May 2010, the first exchange came in July 2010, and the first parity came this week, and the sequence was the story of belief becoming price, and the price becoming a number the world could see.

The lesson was also about the quiet beginning, and the beginning was the pattern. The currency was launched in January 2009 by an anonymous developer, it was mined by hobbyists for years with no price at all, and it was mocked by economists as a toy and a bubble and a Ponzi scheme, and the mockery did not stop the climb. On Wednesday the climb reached the dollar. The lesson is the February 2011 story, and the story is the lesson: the value that no government creates can still be created, the belief can become the price, and the quiet experiment can grow up in public.

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