Voices: The dark side of Bitcoin

• The goal of creating an anonymous%2C untraceable and unregulated currency goes back many years
• Bitcoin enables monetary exchange beyond the reach of the government
• Bitcoin%27s volatility makes it a poor store of value and a lousy inflation hedge

An earlier version of this story had Reuben Grinberg's name misspelled.

A little over a year ago, I spent a Sunday night at a New York City bar called EVR to witness a first. EVR was about to accept payment in Bitcoin. My host was a charming, 24-year-old entrepreneur who was an owner of the bar and a Bitcoin pioneer. EVR was an edgy, tech-savvy hipster hangout, and the evening marked a milestone for a virtual currency with the promise to rival cold, hard cash.

What a difference a year makes. Flexcoin, a Bitcoin bank, went out of business this week. Last week, Mt. Gox, the largest Bitcoin exchange, "lost" roughly $500 million and shut down. Several weeks earlier, my host from EVR, Charlie Shrem, was arrested and charged with laundering money for users of Silk Road, a Web destination for buying drugs and other contraband (he denies the charges). Other than that, it was a pretty uneventful year for Bitcoin -- unless you consider massive volatility eventful. Bitcoin fluctuates wlldly, from a low of $100 to a high of $1,200.

As all this unfolded, Napster came to mind, and I wondered whether Bitcoin would soon go the way of Napster and bite the dust. There are parallels between the two. Both were created by those in the technology vanguard. Each promised an elegant avenue to improve something basic in our lives. But dig deeper and Bitcoin feels very different.

Napster was a file-sharing program founded by high school students to enable sharing MP3 music files. It was doomed because it made possible free downloads of copyrighted music. The music industry got serious about protecting its interests and sued Napster, its founders and its users. There were stories of parents facing six-figure lawsuits after kids downloaded music on their home computers. That was scary, but it was also innocent. People just wanted better access to music.

Bitcoin's roots appear darker. The best depiction of the digital currency's origin I found was a 2011 Hastings Law Review article written by then-law student Reuben Grinberg, now a lawyer at Davis Polk in New York. Many people know that Bitcoin emerged in 2009 after its "father," a programmer using the pseudonym Satoshi Nakamoto, launched it and promptly disappeared. But most don't know that the goal of creating an anonymous, untraceable and unregulated currency goes back many years. Efforts to create an anonymous digital currency had long been championed by extreme libertarian groups.

Bitcoin was launched on the heels of the financial crisis, as the Tea Party emerged and trust in governments and financial institutions sunk to an all-time low. For the tech-savvy, Bitcoin was the perfect solution to exchanging money beyond the reach of government.

Maybe that's the point of Bitcoin? Duh, you might say, Bitcoin is just a way to transfer money or make payments without using cash. But that can't be it. Credit cards, debit cards, Pay Pal, Square and countless others all do the trick.

Supporters argue that with Bitcoin, there's no risk of a government printing money and driving inflation. Maybe, as long as you trust (and understand) the algorithm governing Bitcoin. Perhaps the bigger problem is that the Bitcoin's volatility makes it a poor store of value and, therefore, a lousy inflation hedge.

Bitcoin is totally off the grid, and that's the magic for its most ardent supporters. But who really needs total anonymity, unless you're into pretty dark stuff? And it doesn't seem to work. Just ask Charlie Shrem.

Trish Regan, anchor and editor at large for Bloomberg TV, is a USA TODAY columnist.