I have yet to read even one clear explanation of bitcoins, but after reading a lot of bad explanations, I think I understand that it's basically the familiar idea of a currency tied to a commodity; instead of gold or silver, the scarce resource is the amount of computing power required to solve one puzzle and collect your bitcoin reward. The bitcoin system even tries to model realworld scarcity with a diminishing payout for the computing, just as if the supply of bitcoinage was being exhausted.

You put the cherry on top when you reminded me of an essential feature of this kind of money: Volatility. A currency can't simultaneously be a medium of exchange for commodities, and a commodity itself. The money starts being a participant in the marketplace instead of just a bookkeeping device.

I'm not sure if bitcoin will work out, but I know that there's a big need for its other major feature: Anonymity. We've pretty much lost that in a world in which most financial transactions take place electronically, and are permanently recorded. We need an equivalent to anonymous paper and coins, and these days, we need a currency we can shoot around the world electronically. If it isn't bitcoin, it'll be something like it.

We live in interesting times.