BitCoin represents itself as having value because it is a limited supply. Followers of BitCoin also believe, and the system represents, that it is protecting users from abuses due to the creation of money. BitCoin represents that the US Government debases the currency by declaring more money by fiat.
And yet, every single BitCoin is a new creation. Every BitCoin was created out of nothing. Exactly the same belief system is in place for BitCoin as for any fiat currency. It is valuable because people believe it is valuable.
So BitCoin is, until it runs out of BitCoins, exactly what it criticizes. BitCoin is money creation. At this point in BitCoin’s existence it is something like a village with a goldmine that is almost half mined out. The difference is that as BitCoin states, it has zero intrinsic value, unlike gold, which has utility value as metal. BitCoin claims that BitCoins can only be used for one thing – money.
So, if I declare private money into existence, and then someone takes it away from me, have I lost money? That is the fundamental question of the BitCoinica lawsuit.
But that issue is more complex than it appears. Because, the very act of valuation and representation of loss exposes the real motivation for the founders of BitCoin. Their motivation is precisely the opposite of what they claim BitCoin is about. Their motivation is to create wealth out of nothing, simply by getting people to believe in the BitCoin system. There is no other basis to their claim of having lost wealth.
They are, in a word, hypocrites. They formally criticize fiat currency. And then they turn around and create a currency and claim significant amounts of that currency as their own.