Bitcoin’s technical definition is a “peer-to-peer crypto-currency”. This means that no particular central authority such as a banking institution prints money or tracks any of the electronic transactions that take place.
This has a huge implication since Governments and financial authorities have no say or control on how this currency is operated. An ever growing amount of online shops and now even some real-life stores are accepting Bitcoins as a payment method.
Bitcoin payments don’t need any third parties such as banks to process transactions, traditionally any online purchase has to be facilitated by a banking institution, credit card company or a licensed intermediary like Paypal, which normally charge fees amounting to between 2-3% of the overall transactions This is however not the case with Bitcoin as any payment is directly sent over the internet from buyer to seller.
The original idea was conceived in around 2009 by an individual using the name Satoshi Nakamoto, who wrote a paper describing how Bitcoin should work and created the first open source software. Nevertheless it is not yet clear if this is a real person, fictitious character, or a group of individuals working under an assumed identity to avoid the pitfalls that popularity brings along.
The Bitcoin network needs a number of electronic data-miners to process and encrypt transactions that take place around the world, for this reason the system rewards such data-miners with a payment of newly generated Bitcoins which is set to reach the maximum milestone of 21 million bitcoins in the year 2140.
Individuals or companies using Bitcoin may opt to sign in for an online virtual-wallet or keep one on their hard disk. An individual may hold an infinite number of such wallets and since transactions are encrypted and secure Governments may never know exactly what amount of Bitcoins is held by anyone. This in itself has created a number of problems during the last years, as some shady characters used Bitcoin to deal in weapons, drugs, gambling and other illegal services.
The European Central Banking institution and the US Government started trying to regulate the use of Bitcoin transactions, albeit somewhat unsuccessfully as the the US Government only managed to regulate banking institutions who offer the exchange from Bitcoin to US Dollars and vice versa. The fact that Bitcoin is being utilized by some unscrupulous individuals for illegal trade does not make it wrong or means that it is intrinsically immoral, in fact various high profile individuals are backing the use of Bitcoins, for example Al Gore, US Vice president, Noble price winner (and president contender) during a Bitcoin conference stated “I am a big fan of Bitcoin… Regulation of money supply needs to be depoliticized”. Many are of the opinion that Bitcoin is the next step in the evolution of our capitalist society since governmental control on currency and payment transactions will be brought down significantly, thereby leaving all trade under the control of market forces.
At time of writing 1 Bitcoin is equivalent to around 314 euro, this currency has still not stabilized and heavy fluctuations means that some people are afraid to start using it and are only investing small amounts at a time. During 2012 one Bitcoin reached the record value of around 800 euro (per Bitcoin) and many started speculating in this currency. Some early adopters of this currency became extremely rich, Roger Ver was an early investor and back in 2010 invested thousands of dollars when 1 dollar was still equal to 1 Bitcoin. Today his capital increased dramatically making him a millionaire, he is one of the few persons who openly discusses his Bitcoin wealth and the Bitcoin community nicknamed him ‘Bitcoin Jesus’ because nowadays he actively promotes the virtual currency and has since also invested in many businesses related to the Bitcoin currency.
The website mtgox.com was one of the first and largest companies traded and held Bitcoin wallets for around 70% of users. Earlier this year, this company based in Tokyo, filed for bankruptcy, as 850,000 Bitcoins went missing. Ever since 200,000 bitcoins were “found”. It is not yet clear what happened exactly but many are suspecting that a group of hackers might be responsible for the missing Bitcoins. This means that Bitcoins are still vulnerable and can be ‘stolen’ in a high-tech heist even though this will involve different techniques than the typical bank robbery. Many suspected that the Mtgox.com incident would result in the downfall of the Bitcoin network but to the contrary this incident sparked more interest and usage increased considerably this year.
Presently websites like overstock.com and newegg.com are accepting bitcoin payments and are selling brand items, sporting goods and electronics. Earlier this year the Apple store unexpectedly started accepting Bitcoin transactions on it’s networks, this sparked high hopes amongst the bitcoin community and many are now eager to see Ebay following suit. The Bitcoin currency would gain massive worldwide recognition and unprecedented popularity if this happens. However at the moment no official statements have been released by Ebay yet and it is unclear whether one day anyone will be able to buy and sell merchandise using Bitcoin on Ebay.
The best way to learn more about the Bitcoin phenomenon is to get some and experiment. You can check the live quoted prices on preev.com to see how much a bitcoin is worth in Euro/ USD at the moment and you can purchase Bitcoins on sites like anxbtc.com and safello.com
1BTC to euro: http://preev.com/btc/eur
bitcoin charts via cryptonews:
Original article published on the Sunday Times (Tech-Sunday supplement) on the 19th October 2014:
Copyright notice : This article was written by Ian Vella and published on the Sunday Times of Malta. Copyright may be shared between the mentioned author and entities. Please do not republish without permission.