NEW YORK -- Kacper Cieśla kept wondering how long it would take for the police to knock on his door.
It had only been a few weeks since the 22-year-old programmer had first heard about Bitcoin in a computer hacker’s forum. Yet Cieśla had enthusiastically embraced the virtual currency, rigging four computers inside his Cracow, Poland, apartment to create the electronic coin out of thin air.
There was an unexpected downside, however, that Cieśla said he feared would draw unwanted attention from the law: Keeping the hardware on day and night was the heating equivalent to setting an electric oven to broil and running it non-stop. As his home began to heat up to uncomfortable levels and the needle on his electricity meter began turning at an alarming pace, Cieśla thought, the authorities would surely suspect him of operating an illegal marijuana greenhouse.
“I kept wondering when the police would come because I've heard that's what's usually happens with big power bills,” Cieśla said. “But it ended up without police intervention, or brain damage caused by too high a temperature.”
When he’s not at a day job coding for a French software company, Cieśla is an active participant in the rapidly expanding community behind Bitcoin. As an early buyer and trader of Bitcoin in late 2010, Cieśla has seen his holdings skyrocket in value over the past few weeks. But in spite of the financial windfall the current market conditions have created for him, Cieśla said he worries the market is overheating. The aftermath of a blowup that he expects to occur could forever tarnish the reputation of the currency, Cieśla said.
“I'm a bit worried that it will be more associated with a speculative bubble rather than the technology itself,” Cieśla said.
Before they were known for their parabolic rise in price -– having gone from trading near $20 in late February to a record $266 Wednesday –- bitcoins were the playthings of a tight-knit community mainly composed of software developers. Trading Bitcoin was about more than making potential profits, Cieśla said. It was about putting money into a project closely linked to anti-authoritarian and libertarian philosophies, "quite radical opinions" held by "some margin of people who have trust issues with government," Cieśla said.
From its beginning as a concept put forward by anonymous Japanese cryptology experts, Bitcoin was embraced as a dream come true by the people Cieśla is talking about. Because the currency could be traded anonymously, was not affected by the actions of national central banks and did not fit neatly into the global money exchange system controlled by large institutions, it quickly became a passion project for the Internet’s anti-authoritarian set. In sites like ZeroHedge and Hacker News, the virtual currency was praised by the people who would also quote Ayn Rand, decry government control, say they supported the actions of Anonymous and WikiLeaks, and advocate for a gold standard.
In turn, sites like BitcoinTalk, the main discussion forum for Bitcoin traders early on, became hubs where conversations about the technical aspects of exchanging currency were mixed with debates about libertarian ideology, heterodox economics and the political philosophy behind individual freedom.
“Bitcoins were like 20 cents back [in late 2010] when I started trading. I was assuming, with very high probability, they might go down to zero,” Cieśla said.
“I hoped they wouldn’t be worthless,” Cielśa said, adding that in spite of the inconvenience caused by running four hot and noisy computers inside his apartment “I felt mining was one way of supporting the whole idea, like saying, 'Yes, bitcoins are awesome' with your computing power."
But the ideological bent of Bitcoin users, Cieśla said, has been watered down as of late.
“As value is increasing now, some people are getting interested purely for the purpose of getting rich fast, which is very naïve,” Cieśla said.
“The dynamics are changing. When you look at online Bitcoin forums, back in say early 2011, there was lot of technical discussion: How can we avoid given problem? What if this happens? How can we improve that? Nowadays, most of discussion is about the price,” Cieśla said.
Cedric Dahl runs Coin Harvest, a sort of Bitcoin brokerage that buys large blocks of the virtual currency from “miners” and trades it with clients. Dahl says those clients have been demanding more than $10 million in Bitcoin every week, an amount of orders he is currently not able to fill.
He agrees that most of the people who bought into bitcoins a few years ago, including himself, initially did so at least in part for ideological reasons. Dahl says he bought his first bitcoins after he was barred from donating to whistleblower site WikiLeaks using his credit card.
“It all started when I tried to make a donation to WikiLeaks. I couldn’t, because my credit card company said WikiLeaks was bad. I disagreed with that. So I bought a bunch of Bitcoin and sent it to them and realized the power of all this,” Dahl said.
Others adopted the currency for similar purposes, Dahl said. “It was smart people who cared about it and wanted to see it grow.”
Unlike Cieśla, Dahl won’t directly say a Bitcoin crash is coming. However, he did note that “if there are people that are getting into it to speculate, I would advise them to not put more money into it than they can afford to lose.”
Dahl’s and Cieśla’s foresight seemed to at least partially play out Wednesday afternoon. After hitting a record high, Bitcoin dropped throughout the day, with especially volatile action in the late afternoon -- leaving the currency to close trading 45 percent off from the record high. The currency continued falling in relation to the U.S. dollar on Thursday, and recently traded close to $130.
Dahl said he believes Bitcoin will survive its volatile current state and thrive, given what the currency represents.
“In a nutshell, it’s a way for free people to interact with each other,” Dahl said, “No one can regulate how that money flows.”