Welcome to a new feature of our website celebrating our love of coinage. This year our members will be contributing monthly articles starting with the controversial "bit"coin.
Since it is controversial, a couple disclaimers before I start.
This article is written by Ron Beard a member of Big Island Coin club. The opinions expressed are mine and not necessarily those of the "Club". Also, this is an information article. I am not encouraging anyone to buy or sell anything or offering investment advice.
Bitcoin: The "Digital" currency taking the world by storm.
Bitcoin was born conceptually in 2008 at the height of the real estate bubble meltdown. As the U.S. government was bailing out banks and private businesses with fiat money and people were losing faith in federal reserve notes, a person who called himself Satoshi Nakamoto published a paper online explaining how money could be sent person to person without the need of banks or governments. In 2009 a patent for Bitcoin was granted. In the past nine years a lot has happened both good and bad. Originally Bitcoin sold 13 for a penny. Today, a single bitcoin costs over $16,000! It has been used for every illegal enterprise but also by tens of thousands of legitimate businesses around the world.
What is a bitcoin?
Bitcoin is a decentralized, open source, peer-to-peer, cryptographic, medium of exchange. Okay then…
Decentralized means there is no person, corporation, bank, government or other entity in charge of it.
Open source means anyone can use it. As opposed to proprietary where you must have permission.
Peer-to-peer means any person anywhere can send money to anyone anywhere with no middleman.
Cryptographic means the transactions are encrypted with 256bit encryption (like governments use).
Medium of exchange is the common definition of currency.
How does Bitcoin work?
Anyone with a bank account can buy Bitcoin through an exchange. There are currently about 125 cryptocurrency exchanges around the world. Go to the exchange, open an account and buy Bitcoin (or any number of other cryptocurrencies). You can buy a percentage of Bitcoin, say .01 for about $168. Or buy a dollar amount say $500 (approx. .03BTC). From there you can shop at thousands of businesses all over the world including Microsoft, Tesla, Virgin Galactic (100 Bitcoins gets you to outer space), NASDAQ, JMBullion, AMPEX, Overstock, Expedia and Dell just to name a few.
The beauty of Bitcoin:
- It's ability to instantly send a payment as simply as sending an email (not waiting till the bank opens on Monday morning, not exchanging dollars for foreign currency, not paying fees every step of the way).
- These transactions are recorded on a public ledger and are verifiable and tamper-proof.
- The number of Bitcoins are set. Their value is determined by the "community" of users. There are no corporate, government or banking entities manipulating the number or value of Bitcoins.
Today, inflation, interest rates, money supply etc. are all controlled by central banks and governments. The value of your dollars are a direct result of your government's actions. However, much like the internet revolutionized information exchange, Bitcoin technology can revolutionize currency exchange.
Now that Bitcoin is "out of the closet", the next few years will be very interesting for Bitcoin.