While surfing and researching on the Internet I skim gobs of information. If I don’t know enough about any particular subject I might skate over the information like a stone skipping across water. If a certain term appears often enough I eventually click on it. The actual reference that piqued my interest this time was that a person or business accepts Bitcoins as payment. My first thought was that Bitcoins must be play money or some kind of fictitious game coin. So why would anyone accept them for payment? While I don’t yet completely understand the concept this is what I found about digital money, the Internet and Bitcoins.
Let’s define money as a medium of exchange. We all know money as dollars regulated by the government and manipulated, for good or bad, by banks and other institutions. For many years there have been predictions that credit and debit cards will eventually replace “cash.” At that time money becomes digital in nature but still regulated and manipulated by third parties. The Internet has revolutionized the world, caused governments to topple and provided tools to change lives. Can the Internet do the same thing to the world monetary system?
What is a Bitcoin?
Bitcoin: A peer-to-Peer Electronic Cash System: as titled by Satoshi Nakamoto, is a networked system of businesses and individuals who participate directly without third party intervention. There is a well defined set of features and rules to protect the integrity of the system. The transfer of Bitcoins is protected by cryptographic techniques using a public and private key. The number of Bitcoins is limited to 21 million, but infinitely divisible for smaller purchases. Transfers are fast, generally free and irreversible–meaning no bounced checks. You can’t spend it if you don’t have it.
How to get Bitcoins.
Okay…I’m still wondering if this is a scam or game. You obtain Bitcoins by trading currency, products, or mining. Mining is used in the early stages of Bitcoin creation and means you compete separately or in a group to solve the next block of a transaction log. It takes massive computing power and energy to mine Bitcoins. This means that trading or “buying” is the most common method. The monetary value of mined Bitcoins as of June, 2012 is $63 million.
The more I research Bitcoins the more I find. All is not a bowl of cherries. In August of 2012 four users sued the Bitcoinica website for $460 thousand to cover losses due to a security hack. While the Bitcoin concept may be secure implementation by operators is subject to concern. This would be similar to security concerns at a conventional bank. Bitcoins are not backed by FDIC–or anything?
My Bitcoin plan.
Money is serious stuff to me. I don’t have any to waste and carefully choose what I buy–mostly. I have been known to feed a few one-armed bandits or buy a lotto ticket now and then. I consider the money spent as recreational–the same as for movies, cotton candy, or watching stock car races. It is in this frame of mind I will explore Bitcoins. Gavin Andresen, a project team leader, says that Bitcoin is an experiment–only invest time or money in it you can afford to lose. I will take that advice.