No. You haven’t heard of them either?
I forget exactly what I was doing, but during a ramble on the Internet I came across a statistic. Bitcoin: The fastest growing currency in the world.
What the hell is a Bitcoin – you ask yourself. I’ll be honest, having done my fair share of reading, I’m still not 100% sure I know myself.
I’ll have a go. A Bitcoin, is an online currency with no tangible physical end product. (i.e. no notes or coins, cheques or cards). Instead it exists solely on the Internet and is deciphered, or rather put together with a 33 character concoction of letters and digits starting with a 1 or 3. A Bitcoin is an example of a crypto-currency. This means that it exists and is regulated by cryptography rather than a Central Bank or Authority like everyday Banking.
Confused? I still am. Even more so, when you start reading and getting into more detail from financial analysts. The wiki for instance – http://en.wikipedia.org/wiki/Bitcoin. Among other random facts; the Bitcoin is analysed roughly 30 times a day by Morgan Stanley and Goldman Sachs (among others I’m sure) as potential new exploitable markets. As there is no central issuing authority; there’s no inflation per se (although in reality the increase in value of a Bitcoin equals inflation). Instead, Bitcoins are produced on a geometric series, until in 2140 21 billion Bitcoins will be in ‘circulation’. At present 25 Bitcoins are ‘created’ or ‘released’ every 10 minutes. By 2017 this will reduce to 12.5 Bitcoins and ultimately every 4 years this will halve further until 2140.
How about the Bitcoin website – http://bitcoin.org/en/ – Bitcoin is a currency, a protocol, a software. Designed for peer to peer transfer, worldwide payments, no processing fees and apparently untraceable. I’ll let you explore the site and draw your own conclusions.
With the Banking debacle in Cyprus – i.e. with the Government freezing and / or directly drawing into individual accounts, Bitcoins have received further publicity and infamy because they can’t be regulated or interfered with, by anyone. They are unhackable, so you don’t need to worry about some nefarious character stealing and they are untraceable.
Which makes me wonder, how on earth do you get money for them? Or at least get money back for them? Apparently you buy these Bitcoins and let them do the hard, investment work for you…
What about this crazy Canadian wally – http://rt.com/news/house-for-sale-bitcoins-781/ he’s only gone and put his house up for sale – in Bitcoins!! 5,362 Bitcoins or $395k to me and you. Allegedly there’s already a Bitcoin changing ATM – which is baffling because you aren’t withdrawing a tangible currency.
What of the Creators? http://www.guardian.co.uk/technology/video/2013/mar/22/bitcoin-currency-video – this video by the Guardian breaks down in a little bit more detail the inner workings of the somewhat anarchic Bitcoin makers.
What of the skeptics? http://go.bloomberg.com/market-now/2013/03/21/sorry-bitcoin-isnt-a-currency/ – the argument being, that you can’t buy ‘stuff’ with Bitcoins. There’s the unsavoury Drug / Silk Road avenue which we won’t go into details on – but is elaborated in the Guardian once again – http://www.guardian.co.uk/world/2013/mar/22/silk-road-online-drug-marketplace, but there are some specific Bitcoin sites that do buy / sell goods and tangible commodities in exchange – a pizza place for instance.
So having evaluated the Bitcoin and provided links for it’s ‘uses’, I’m conscious that I still don’t know how it works or what Bitcoin mining is. Here’s a synopsis of Bitcoin Mining – http://motherboard.vice.com/blog/a-guide-to-bitcoin-mining-why-someone-bought-a-1500-bitcoin-miner-on-ebay-for-20600 – apparently it’s a way to verify transactions, a general ledger in standard monetary speak. Except it’s not. It’ll get more confusing and complicated to keep track of transactions the more Bitcoins that are added to circulation from 2016 onwards. Probably best, not to even try and bother…although the link is a good one if you wish to try and get a better understanding.
Finally then, how a Bitcoin works; I went back to the ‘official’ Bitcoin website and this is their definition – The basics for a new user.
“As a new user, you only need to choose a wallet that you will install on your computer or on your mobile phone. Once you have your wallet installed, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose one of your Bitcoin addresses to your friends so that they can pay you or vice versa, you can pay your friends if they give you their addresses. In fact, this is pretty similar to how email works. So all that is left to do at this point is to get some bitcoins and to keep them safe. In order to start using Bitcoin, you are not required to understand the technical details.”
So. What are you waiting for? Go trading, or purchasing, or generating, or whatever the hell it is you do with Bitcoins. Evidently there is scope to make some serious cash – after all the whole Cyprus banking palaver has seen the value of Bitcoins spiral from circa $40 to over $70, so there was some quick money to be earned.
If anyone can explain it to me in layman’s terms, I’d be interested (and perhaps less cynical) to learn more. Otherwise, hopefully this has helped ‘deriddle’ something that has left me scratching my head. Perhaps, all I’ve done is publicize some crazy new-age ponzi scheme and delivered infamy. From an IT perspective I was curious, simply because it all takes place online.
Oh to be a Bitcoin miner.