Four years ago, the big craze was signing up with a local credit union to stick it to the banks. It was a way to avoid frivolous fees, and credit unions do a good job of giving back profits and making the customer feel valued. What both types of banks don’t want you to know is that cryptocurrencies, especially bitcoin, exist at all. It’s a relatively new type of currency, developed with the Internet in mind.
With bitcoin, there are lower fees, no authorities that can freeze your account and no arbitrary limits or prerequisites. Plus, you can use them in any country.
It is a decentralized, peer-to-peer network of users like you and me. It’s free from banks. If you didn’t know bitcoin existed, blame the banks – they’re the ones that are fearful of this disruptive technology and are trying to silence it.
I first heard about bitcoin in the summer of 2011. A single coin back then was trading for $9. Then a New York Times article by Adrian Chen covering bitcoin went viral, boosting it to a solid $14.
Today, bitcoin is trading at $830. This should in no way discourage you from adopting; bitcoin was trading at over $1,200 at its peak at the end of last year (Dec. 2, 2013).
Bitcoins are generated all over the Internet by anybody running a free application called a Bitcoin Miner. Mining requires a certain amount of work for each block of coins. The network automatically adjusts this amount, so bitcoins are always created at a predictable and limited rate.
The software is also open source, and anybody can review the code. This creates and gives everyone access to a global market. Bitcoin will do to finance what the Internet did for publishing.
Bitcoins are stored in a digital wallet. When you transfer bitcoins, an electronic signature is added. After a few minutes, the transaction is verified by a miner and permanently stored in the network.
Bitcoin is here to stay. It’s being used to purchase goods and services of all kinds, from breakfast in a small Seattle coffee shop to a brand new Ferrari. Quick Response (QR) codes can be used to scan and send money to someone electronically, instantly and without fees. Artists can embed their public keys into their work so people can send them tips.
There are no chargebacks; it’s become ideal for online gambling and the Internet black market. On Feb. 1, Johns Hopkins University researchers announced “Zerocoin,” an extension to the bitcoin protocol, which effectively makes sending and receiving payments anonymous. This creates even more options and potential uses for the currency.
The media and bloggers alike have claimed that bitcoin is for cyber criminals and Internet thugs. Some say the phenomenon is fueled by greed and mania, even going as far as calling it a Ponzi scheme. But the price will continue to soar, and these same people will be forever regretful that they turned their backs on this innovative technology.