The worst currency in history

Your columnist must admit that he doesn't really understand bitcoin. He certainly doesn't trust it. For a start, the process by which bitcoins are made? discovered? summoned into existence? is apparently called mining. From painful experience, Quintus can testify that Mark Twain was right when he said that "a mine is a hole in the ground owned by a liar".

Even if one were inclined to give those involved the benefit of the doubt, the whole thing seems about as useful as the currency system outlined by the late, great Douglas Adams in The Hitchiker's Guide to the Galaxy. "The exchange rate of eight Ningis to one Pu is simple enough," writes Adams, "but since Ningi is a triangular rubber coin six thousand eight hundred miles along each side, no one has ever collected enough to own one Pu.

Ningis are not negotiable currency, because Galactibanks refuse to deal in fiddling small change." Bitcoin has strikingly similar problems, as Thomas Di Fonzo of The Wall Street Journal found last week when he set out to buy lunch, paid $76.16 for a $10 pizza and ended up dining on ice cream instead.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The problem apart from the $9.47 in fees was that the bitcoin price changes dramatically, and the seller hadn't updated the pizza price to reflect that. To make matters worse, bitcoin payments can take an age to process: Di Fonzo gave up after waiting 30 minutes for the order to be confirmed. Undeterred, he went on to buy a $5 ice-cream sandwich for $17.50, including $9.62 in fees. He finally got the pizza four hours later by which time he'd lost his appetite.

Still, Di Fonzo did better than Laszlo Hanyecz, who paid 10,000 bitcoins for two pizzas from Papa Johns on 22 May 2010 the first time the cryptocurrency was used for a real transaction, says Business Insider. At the time, that was around £30. The pizzas were worth £19, so even then he got a poor deal. At the latest price, it amounts to £135m. In the 17-year history of this page, it's hard to think of anybody who's blown so much on so little.

So even though GMO Internet, a Japanese tech firm, is offering to pay part of its employees' salaries in bitcoin, according to Fortune, it's hard to imagine that anybody who takes up the offer will be intending to spend their wages. Rather, they'll be hoarding bitcoin in the hope that it'll rise in value. It all sounds a bit like the US prison system, where packs of mackerel are enormously popular, even though nobody can stand the taste. Instead, they are used as currency when smoking was banned, mackerel replaced cigarettes as the gold standard of prison money.

Every so often, the guards flood the prison with mackerel, sending the value of the prisoners' stashes slumping, Charlie Shrem, a bitcoin entrepreneur who recently did time, told National Public Radio earlier this year. The experience doesn't seem to have put him off bitcoin, but perhaps it should. Unlike mackerel, the supply of bitcoin is supposed to be limited but "Satoshi Nakamoto", the currency's shadowy creator, is said to own 1,000,000 bitcoins (£13.5bn).

If he or other big holders were to sell, the value of bitcoin would collapse. Whoever Satoshi is, he must be watching the price and thinking it's time to take a profit at least enough to keep him in pizzas for the rest of his life.

Tabloid money Heathrow expansion is a £5bn rip-off

"Last week, at the House of Lords, I attended a presentation about who will build the new runway for Heathrow," says Karren Brady in The Sun on Sunday. That the airport is already the most expensive in the world for passenger duty came as a shock. But that fee will double with the £17.6bn planned expansion (which Brady supports). Worse still, the operator of Heathrow thinks that it should be the only one to get the chance to build the runway, despite another developer offering to do the job for £5bn less. Surely this is "an opportunity to break the monopoly and bring down charges for passengers at the same time"?

An American company has developed a flying car, says Jeremy Clarkson in The Sun. The £90,000 three-wheeler has seating for two, a propeller on the back and wings that fold into cubby holes under the doors. You drive along until you hit a jam, and then take off.

Yeah, right. Why would you ever drive when you can fly? And why not use a plane? The car also needs 1,100ft of straight road to hit its 100mph take-off speed. Even if you did manage to find a road like that, how will the police react when you explain that you were only going that fast because you wanted to take off? "Oh, that's all right sir?" I don't think so.

British Wimbledon semi-finalist Johanna Konta vowed never to leave Britain to become a tax exile, says Brian Reade in the Daily Mirror. "This is my home, and I'll happily pay my taxes," the Australian-born tennis star has said. For that reason alone, she deserved to finish ahead of Formula One driver Lewis Hamilton in the BBC's Sports Personality of the Year public voting stakes (the award went to runner Mo Farah on Sunday).

"When you spend ten years in a foreign tax-haven shielding your £131m wealth from the British Treasury and even register your private jet in one to avoid paying £3.3m VAT, all you deserve from the nation whose flag you still like to wrap yourself in, is cold indifference."