Money that exists outside of any governing body has arrived. With the rise of digital technology, digital coins that you can send through the internet have been born.
Welcome to the age of decentralized digital currency, and the rise of Bitcoin.
WHAT IS BITCOIN?
Bitcoin was first created in 2009 by an anonymous creator. It is a currency that exists without any centralized governing body. Money is transferred directly person to person via the internet- without going through a bank or any other middle man. This means the fees are lower, Bitcoin can be used worldwide, an account cannot be frozen, and there are no prerequisites.
In short, if you want a Bitcoin account, there is nothing and nobody stopping you from getting one. As long as you have access to the Internet, you can have an account.
Technology enthusiasts and capitalists are claiming digital currencies are a fast and cheap alternative to traditional financial systems. They are also great for businesses in countries with unstable currencies.
There are other benefits associated with Bitcoin as well:
- Low Inflation risk – Bitcoin is designed to be finite. Only about 21 million Bitcoins will ever be generated. The release of Bitcoins is slowing down and is predicted to stop in 2050.
- Low collapse risk: Regular currencies depend on governments which occasionally fail. Bitcoin is not regulated by any one government so it is safe from this.
- Untraceable: You don’t have to be afraid of any organization being able to trace the source of your funds
A mysterious creator?
Who is Satoshi Nakamoto?
The origin of Bitcoins makes for a fantastic story. Satoshi Nakamoto is credited to be the creator of the digital currency, but there are no records of his identity or identities prior to the creation of Bitcoin.
On his P2P foundation profile, he claims to be a 37 year old male living in Japan – but few people believe this because of his fluency of English and his Bitcoin software not being documented or labelled in Japanese.
Both The New Yorker and Fast Company tried to solve this mystery, but the results of their investigations were conflicting and inconclusive.
In 2010, Satoshi Nakamoto vanished and has not been heard from since.
HOW IT WORKS
There are several currency exchanges where you can trade your fiat currency for this cryptocurrency.
Your bitcoins are kept in your digital wallet on your computer or mobile device. Paying with bitcoin is like sending an email or a text.
- Cryptocurrency: A medium of exchange designed around securely exchanging information made possible by certain principles of cryptography. The first cryptocurrency to begin trading was Bitcoin in 2009
- Fiat Currency: Currency that a government has declared to be legal tender
Bitcoin is a peer to peer network. This means that everyone who uses Bitcoin is a tiny piece of the entire bank.
With Fiat money, a central government decides when to print or distribute money. Bitcoin doesn’t have a central government, so currency is issued through Miners and Mining.
Behind the scenes, the Bitcoin network is sharing a public ledge called the ‘Block Chain’.
This ledger is completely transparent, anyone can access it and people are frequently encouraged to do so!
This block chain is huge – over 6GB of data. This is where the Miners come in.
The Miners convert the data of the Block Chain into a hash, which is much shorter than the initial chain, and at first glance, seems no more than a random sequence of letters and numbers. The raw data of the block chain is converted into a hash through an algorithm, which the Miners calculate.
The process of converting this data and solving this math problem is called mining.
Still confused? Check out this video from weusecoins for another explanation.
Are people using it?
It doesn’t cost anything for businesses to start accepting Bitcoins. It’s easy to set up and there are no charge backs. A lot of businesses just get additional business from the Bitcoin economy, at no extra charge to set up.
Below is a map that shows how many establishments in the world are using Bitcoin. The map updates in real time, so if you’d like to see it for yourself, click HERE.
By the end of August 2013, the value of all bitcoins in circulation exceeded US $1.5 billion with millions of dollars worth of bitcoins exchanged daily.
In March of 2014, Bitcoins credibility was questioned when two huge events shook the industry.
1. The Tokyo Bitcoin exchange, Mt. Gox filed for bankruptcy protection when $425 million went missing. Hackers were blamed for the disappearance.
2. Flexcoin, an Alberta Canada based company, lost about $400.000 to a hacker attack. This company actually ended up closing its doors because there were no ‘resources, assets or otherwise to come back from this loss.’
This changed everything. Bitcoin suddenly went from being one of the most stable currencies in the world, to an incredibly risky investment. The very thing that made it so appealing, the non-regulation or governing, is what made it vulnerable to hacking.
After jumping to more than $800 USD a coin in January, the worth has plummeted after these shocking events. They have lost over half their value and are now hovering around the $400.00 mark.
You can check the price in real time HERE
The silver to Bitcoin’s gold, Litecoin has been growing in popularity even as Bitcoin’s falls.
It is said to be cheaper to generate, more plentiful and easier to use for small transactions than bitcoin.
While prices for both have slid since the disasters in March, Litecoin’s worth remains about 490 percent higher than six months ago – compared to only 140 percent for Bitcoin.
More than 36,600 computers are part of the Litecoin network, according to BitInfoCharts. That’s more than half of the 63,000 computers for Bitcoin, which is more prominent and two years older.
At the Vault of Satoshi, Litecoins account for 20 to 25 percent of all trades.
The average number of daily transactions in Litecoins worldwide in April was 155 percent greater than October’s level, according to CoinDesk data. That compares with only a 19 percent increase for Bitcoins.
Despite this, daily transactions in Bitcoins still outnumber those in Litecoins almost seven-fold.