There are a lot of questions surrounding the idea of Bitcoin, as well as other so called Crypto-Currencies today, and with good reason. Any form of payment, or monetary exchange you might consider should be thoroughly investigated, especially if you plan to use something like Bitcoin for the increasing variety of applications it can be applied to. Bitcoin has been made use of in thousands of way’s, some good and some questionable. So if you’re looking to invest, your data is being held hostage, or if your just curious about this new form of currency we invite you to read on.
Why is Bitcoin different from other forms of currency
Like other methods of payment, Bitcoin can be used to buy things electronically. In that light, Bitcoin is very similar to dollars, euros, yen, and other currencies. However, Bitcoins most important characteristic which makes it different from those other forms of currency, is the idea of decentralization. This means that no one entity is in control of the currency. The transactions made in Bitcoin are always handled on a peer to peer bases, with no company or person in the middle. There are arguments to be made for and against the idea of a decentralized place where transactions can take place, all of which vary in their own merits.
The only other scathing difference is that this currency is entirely digital. Instead of there being a physical entity backed up by a market, or physical metal such as Silver, or Gold, Bitcoin is entirely digital. Based on a mathematics, people around the world use a formula to produce Bitcoins. The formula is made publicly available for free so that it can always be checked by anyone interested in doing so. This also means that there is only a finite amount of bitcoins which can ever be produced. The Bitcoin Protocol which the rules of Bitcoin work from, say that only 21 million Bitcoins can ever be produced, and that each coin can be broken down into a one hundred millionth of a coin, known as a ‘Satoshi’ after the founder of the currencies alias ‘Satoshi Nakamoto’.
The Good Side of Bitcoin
As discussed earlier, there are shades of good and bad in this form of currency. Coindesk, one of the many Bitcoin Exchanges, gives 7 reasons why they feel more people should use Bitcoin.
- It’s Decentralized – As metioned earlier, Bitcoin has no central authority or entity. This means every machine that mines bitcoin and processes transactions make up a part of the network, and the machines work together. That means that, in theory, one central authority can’t tinker with monetary policy and cause a meltdown – or simply decide to take people’s Bitcoins away from them, as the Central European Bank decided to do in Cyprus in early 2013.
- If some part of the network goes offline for any reason, the money keeps flowing.
- It’s easy to set up – Conventional banks make you jump through hoops simply to open a bank account. Setting up merchant accounts for payment is another Kafkaesque task, beset by bureaucracy. However, you can set up a bitcoin address in seconds, no questions asked, and with no fees payable.
- It’s anonymous – Users can hold multiple bitcoin addresses, and they aren’t linked to names, addresses, or other personally identifying information
- It’s completely transparent – Bitcoin stores details of every single transaction that ever happened in the network in a huge version of a general ledger, called the blockchain. The blockchain tells all.
- Transaction fees are minuscule – Most banks typically charge a $10 fee for international transfers. Bitcoin charges no such fees.
- It’s fast – You can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.
- It’s non-reputable – When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you.
So theoretically, Bitcoin appears to have a lot of good. However, like coins there are two sides to consider.
Equal Parts Good and Bad
The currency is still relatively new, with less than 10 years of market history. This could be why it’s value is so volatile as well. Bitcoins exponential growth, and following declines all have shown that it has still yet to find a median point of value in the market. The price of Bitcoin seems to always be on a sort of rollercoaster ride.
Contributor to Entrepreneur.com Matthew Toren explains, that although there are many things you can use bitcoin for, they are still very limited compared to other forms of currency. He go’s on to cite a UC San Diego and George Mason university study which found that nearly 60 percent of spent Bitcoins were exchanged through a Bitcoin-supported gambling service.
Steve Ryan, a Researcher and Remote Control Technologist writes that with the advent of crypto-currencies like Bitcoin, hackers can now buy, sell, and trade without requiring a bank account. They are able to pay cash for Bitcoin at their local shopping outlet and within 10 minutes be purchasing illegal items online. They could sell them and receive payment in Bitcoin, then again cash these Bitcoin in at the same outlet and walk home with a profit.
The ability to mask who you are has made Bitcoin all too enticing for hackers, who have implemented the payment process in conjunction with Ransomware, which we have also discussed in our blog "What to know about Ransomware".
Crypto-Currency May Be The Future
Although still considered very new, crypto-currencies future seems certain given it's superior affinity to security , and the growing uses companies are finding with the Bitcoin blockchain. We may not know for certain yet what is to come for Bitcoin, as it's technical legalities are still in question, but it's usefulness can't be denied.
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