Bitcoin is like Kim Kardashian.
No, it's like gold. No, it's more like the tulip craze in Holland.
As news reports about the cryptocurrency have exploded, proponents, reporters, analysts and academics have come up with all sorts of comparisons as they try to define Bitcoin to everyday consumers and to describe its place in society.
Try Googling "Bitcoin is like" and you'll get all sorts of answers popping up. So I thought I'd point out some of these analogies and why they're being used to describe this new currency movement.
Many of the analogies are imperfect, and some are in dispute. But they give a little better understanding of what Bitcoin is and how it works.
Bitcoin is like gold: This is the first thing that autofills when you type "Bitcoin is like" into your Google search bar. Many people compare the cryptocurrency to gold because, like gold, Bitcoin has a finite supply (only 21 million will ever come into existence), and it has to be "mined" (although Bitcoin is mined by people on computers solving computational puzzles instead of by people with picks and shovels working under the ground). Like gold, Bitcoin is not backed by a particular government, and it derives its value in part because a group of people agree on its value.
This is an over-simplified explanation of Bitcoin, but it helps explain the analogy. Others have argued that Bitcoin is not like gold but more like other mediums of exchange. The Guardian's technology editor compared it to cowrie shells.
Bitcoin is like the island of Yap: Dave Birch of Consult Hyperion, a consultancy specializing in online transactions, has compared Bitcoin to the stone currency in the island of Yap, where islanders placed value in large boulders. Because the boulders were too big to move easily, islanders who needed to trade the currency would just agree that a certain stone now belonged to someone else.
Similarly, bitcoins are not physically exchanged between people, but rather a ledger keeps track of who owns how many bitcoins.
Bitcoin is like Kim Kardashian: American Public Media's Marketplace recently aired a piece on Bitcoin in which the reporter interviews Adam Waytz, a professor at Northwestern University’s Kellogg School of Management. Waytz compares Bitcoin to Kim Kardashian, saying that both have value because of a "shared illusion" where people agree they are valuable. Waytz says in the interview that Kardashian is famous for being famous, and Bitcoin has value because Bitcoin proponents have agreed to value it.
You could use lots of other things to make that analogy, but it's so much fun to use Kim Kardashian in analogies, isn't it? Plus, it gives us a chance to mention Kardashian's BF, Kanye West, and his brief -- nonconsenting -- foray into cryptocurrencies when a couple of developers tried to name an alternate coin after him. (Coinye West was quickly killed off after West's lawyers went after it.)
Bitcoin is like the honey badger: Honey badger "don't care." And, apparently, neither do Bitcoin enthusiasts. In 2013, according to news reports, a billboard popped up in Silicon Valley showing a picture of the furry, ferocious animal and calling Bitcoin "the honey badger of money."
In case you've been living under a rock, the honey badger exploded as an Internet meme in 2011 thanks to a viral video where a mock voice-over of nature footage talks about how the honey badger "don't care." (The video has some worse-than-G-rated language, so be careful if you go looking for it during work hours.)
The idea behind the analogy of the Bitcoin to the honey badger is that Bitcoin enthusiasts don't care what others think of the cryptocurrency. Believers see it as a new, revolutionary payment system that has larger technological implications, so many are unperturbed by fluctuations in the price of Bitcoin or by detractors of the cryptocurrency.
Indeed, earlier this month, Bitcoin enthusiast and venture capitalist Marc Andreessen wrote an op-ed piece in The New York Times calling Bitcoin a breakthrough in computer science and outlining a number of potential uses for the technology.
"Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage," Andreessen wrote.
Bitcoin is like tulip mania: In December, the price of a bitcoin plummeted by more than 50 percent after the People's Bank of China warned Chinese financial institutions not to trade in Bitcoin. That drop, which had been preceded by record-high prices of up to $1,000 for a bitcoin, led some critics to reiterate their convictions that Bitcoin is a bubble like the tulip mania speculative bubble in Holland in the 17th century.
Certainly, the Bitcoin price is speculative, as people intrigued by this new cryptocurrency help drive the price upward. But what will happen with the Bitcoin bubble? Will it also crash, like the tulip market in the 17th century? The experts are watching.
Bitcoin is like North Korea: This little gem of an analogy comes from an article in Business Insider.
As you probably know, one of the traits of Bitcoin is that, while owners of bitcoins are not publicly available (unless they say they own Bitcoin), every transaction using Bitcoin is available on Bitcoin's public ledger. Several people have been trying to determine how many people in the world own bitcoins, and how that wealth is distributed.
Which brings us back to North Korea. According to estimates by Business Insider and some others who study Bitcoin, only a few people own the vast majority of the bitcoins. Business Insider said the distribution of Bitcoin wealth is similar to the distribution of wealth in North Korea.
As a side note on this topic: The FBI is actually the holder of the world's largest single Bitcoin wallet after it raided the Silk Road. That doesn't make the FBI the largest Bitcoin holder, but it does mean the FBI owns more bitcoins than the Winklevoss twins.
Bitcoin is like the Wild West: Speaking of the Winklevoss twins ... Cameron Winklevoss reportedly told a panel of New York regulators that speculating in Bitcoin is like the "Wild West" and that having a "sheriff" to regulate the fledgling cryptocurrency would be a good thing.
Because Bitcoin is relatively new, many people are still trying to figure out how to deal with myriad issues, from taxes to regulatory guidelines for Bitcoin businesses.
What do you think of some of these analogies? Are there others we should add to this list? Share your thoughts in the comments, or message me on Twitter: @allisonsross.