So, what is Bitcoin? Why are we hearing about it more and more?
Bitcoin, 5 years old since cyberbirth in 2009, is the first and most widely accepted of the growing number of cryptocurrency on the international market. Countries such as China, Brazil, Germany and Singapore have either implemented regulations and/or tax guidelines regarding bit coins.
The advantages of Bitcoin include low transaction costs, privacy and no more need for middleman verification with this peer-to-peer payment system. The main disadvantages include enthusiastic hackers that could result in a loss that may never be recovered and market volatility of bitcoin value.
From a practical yet geekish standpoint, Bitcoin is a technological ecosystem that includes a network where “miners” handle payment transactions for bitcoins (the currency itself), in order to maintain a decentralized accounting ledger known as the “blockchain”. Owners use “virtual wallets” to store the cybermoolah and as a reference point to send and receive money. A payer sends a bitcoin payment from his/her wallet where it is then received into the payee’s wallet. All transactions are logged into the blockchain that maintains the record of currency changing hands between owners.
Retailers such as Overstock that accept bitcoins, may work through an exchange service that converts the bitcoin amount to dollars using the current exchange rate when a purchase is made.
In the past several months, the media has embraced the excitement of the investment and futuristic possibilities of Bitcoin together with the risks of market volatility. The value can fluctuate wildly based on government announcements regarding Bitcoin, hacker incidents, new opportunities, and whatever else puts a burr in the saddle of investors.
Last Friday, Mt. Gox, the world’s leading bitcoin exchange in Tokyo, filed bankruptcy after a devastating hacking incident that wiped them out to the tune of half a billion dollars. Ouch. This emphasizes the need to conjure up a variety of safety measures. We will see how this plays out. It could be deposit insurance similar to the FDIC. It could be enhanced technological security. It could be some type of government regulation or a combination thereof. Time will tell as the Cyber Wild West continues to make its mark on a global level.
Will dollars go away in the future as we move towards the Jetsons time space continuum? Probably not. But it seems as if the momentum for cryptocurrency is strong with a growing number of coin types available, dedicated supporters from around the globe, and continual advancement in ecosystem sophistication. If technocrats can devise a global system where we can feel safe wielding our virtual cybercoin wallets without fear of losing our tail, then Bitcoin and other cybermoolah could take off like rocketships into cyberspace.