Bitcoin Explained

Lifestyle

Bitcoin Explained

Justin Lavelle

August 20, 2016

Supposedly invented in late 2008 by the reclusive Satoshi Nakamoto, Bitcoin has been making an impact in the world of currency and commerce. While critics say it is a mere funding tool for unsavory drug runners and other black market participants, its supporters say bitcoin is the future in a world with ever increasing economic uncertainty and instability.

Free of the backing of a treasury or government, many believe it is a currency by the people, for the people, and of the people.

What is Bitcoin, anyway?

Bitcoin is crypto-currency, or simply put – the Internet’s version of money. It is a decentralized currency, meaning it’s not controlled or regulated by any government, treasury or bank. Bitcoin can be transferred instantaneously (in most cases) and with minimal or no fees to anywhere or anyone in the world.

Overstock.com was one of the first major retailers to begin accepting bitcoin, but everything from a cup of coffee to mansions and Lamborghinis have been bought using it.

While traditional physical currency is typically backed by assets or a government guarantee and is physically printed, bitcoin remains digital and is created by people through “mining” – a process of solving complex strings of mathematical equations using advanced computers running Bitcoin software around the globe. Each individual bitcoin has a public address and a private key, which have their own unique alphanumeric strings, allowing the bitcoin to not only have value but is also a means for transferring that value.

Is it secure?

Similar to physical money, precautions need to be taken to ensure bitcoin is secure. This new age of currency and exchange comes with its own unique security challenges that need to be addressed. Unlike with credit cards, once someone has accessed public and private keys and stolen bitcoin, it is gone without possibility of getting it back. Safe storage of bitcoin keys is absolutely paramount.

Digital wallet companies, such as CoinBase, are available to store bitcoin. In the digital landscape, hacking is the largest potential threat, and hackers have stolen over $570 million in bitcoin. Before choosing a digital wallet, it’s critical to do some due diligence to ensure maximum security. Alternatively, some experts advise keeping private key bitcoin data offline, by storing on a USB or simply keeping a printed copy of the keys in a physical wallet.

Bitcoin benefits

Many smaller retailers such are subject to pay up to 3% transfer fees on transactions, which in many cases causes the cost of goods and services to increase to accommodate accordingly. With bitcoin’s fees being pennies on the dollar to fees from credit card processors, in theory, it could help drive the cost of goods and services down.

Furthermore, Bitcoin is not subject to exchange rates and transfer fees are substantially lower, which supporters feel could serve as an economic equalizer and improve the flow of international commerce.

A number of major brands accept Bitcoin as a currency, including Apple’s app store, Zappos, Sears, Square, Ebay and OkCupid, among many others.

Bitcoin is an alternative that is forging its way in the uncharted territory of commerce and currency. It will be interesting, to say the least, to see how it evolves.

Disclaimer: The above is solely intended for informational purposes and in no way constitutes legal advice or specific recommendations.