How does the entire world stay in contact every second of every day?? The internet. Not a new concept in itself but a bold move has been made in terms of how people on this planet perform transactions with each other, locally and internationally. From peer-to-peer transactions to official business transactions, Bitcoins are the new electronic currency that is taking the world by storm.
So what are they exactly? In the simplest of terms: A Bitcoin is the first decentralized digital currency.. Okay even that isn’t so simple, but decentralized only means that there is no central hub that produces this currency. Like how dollars are made by special press machines located in the federal reserve banks here in the U.S. Bitcoins can be made by anyone who decides to download the free application called a bit coin miner. Mining requires a certain amount of work for each block of coins, this amount is automatically adjusted by the network so that the bit coins are always created at a predictable and limited rate. To find out more about the Bitcoin process just watch the video here. Ofcourse, another (more simple) way to receive Bitcoins is by going to websites like MtGox.com and just trading in hard earned dollars for this digital currency, a process that works both ways. Now at first glance this seems risky because you might not think that it is ‘real money’ like the dollars you are so used to holding in your hand. But in fact, what makes the dollar itself real? It’s only a piece of paper, but its your belief in our monitory system that makes it real. So before you turn super skeptical on this new form of currency let’s take a look at how these transactions actually occur.
Essentially Bitcoin transactions always occur on a direct peer-to-peer basis. This means that there is no intermediary such as a bank that can charge you for the transaction (the infamous transaction processing fees we’ve all come to hate). It is simply you digitally transferring these Bitcoins directly to another person. The result is that you can use these bit coins all around the globe and that there is no ‘superpower’ that can freeze your account. If you use digital banking you are already familiar with the digital wallet. It’s this same principal which saves all of your Bitcoins online. Whenever you make a payment it receives an electronic signature verifying the exchange and the transaction is then stored anonymously in the network keeping track of all exchanges around the globe.
But how realistic is this whole internet based monitory system…. Is it actually used in real life transactions or is it merely online mumbo jumbo just meant to trap people into carelessly investing in this new ‘trend’? Well according to Kashmir Hill, a writer for Forbes magazine, it is entirely possible to live solely off of Bitcoins. Check out how she did it by reading her article here. In fact, there are several ways to utilize this new currency. You can currently buy video games and other online services, gamble online, shop at stores (how limited they might be as miss Hill found out). But most importantly… there are now even a couple bars that even accept Bitcoins including the EVR bar in New York.
However, as cool as this sounds the things you can buy with Bitcoins are still very limited and this new form of currency is definitely (and rightly so) on the U.S government’s radar as they’re currently investigating to prevent money laundering. But although it’s usage is still limited, Bitcoins are definitely rising in popularity as more and more people are starting to ‘believe the hype’ (Sorry Public Enemy). Will this actually grab a strong foothold in our global economy and revolutionize the way we do business? It’s unpredictable right now and although it sounds really cool on the surface, I myself will definitely hold off of investing in this new technology (well at least until the government is done with their investigation and everybody else takes the leap of faith first… and comes out financially unharmed on the other end).
Here are the references I used for information in case you want to do some research yourself: