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What is a Bitcoin? Well before one can truly understand what a Bitcoin is, I feel as if they must understand the general concept of cryptocurrency. In brief, cryptocurrency is simply a digital or virtual currency that is protected by cryptography as means of security. This form of currency is notorious for its anonymous nature. There are several dozen kinds of cryptocurrency already in place and being formed too. The most popular version of being called a Bitcoin. Imagine Bitcoin is to cryptocurrency, just as US dollar bills are to paper money, but with a few small changes.
Bitcoin is slowly changing everything, with every century that passes by so does great innovation, and this trend is no different in the upcoming 21st century. Just as motor vehicles shaped the 20th century, and changed every aspect of life, so will Bitcoin in the years to come. Bitcoin is the name of a digital currency that is created and held electronically. Originally founded in 2009 by a man known as Satoshi Nakamoto, Bitcoin has been the hot topic for discussion in financial, law, and educational realms. As times go on, it is apparent that Bitcoin will become a more normal part of our lives as more and more companies start to recognize it as a legitimate means of currency.
Just as Bitcoin has created many solutions for modern day problems, it has also raised quite a few questions as well. One of those questions being what makes an electronic currency like Bitcoin, any different from physical, paper currency? The key characteristic to Bitcoin is the mere fact that it is decentralized. This means that no intuitions, or banks control the Bitcoin network. This very reason of privacy puts a lot of Bitcoin advocates at peace of mind. When founder, Satoshi Nakamoto initially made Bitcoin, he designed the software so only 21 million Bitcoins can be in circulation as a maximum for one point in time. This also destroys anyone’s ability to centralize the currency, and control it as I stated before.
With all that being said, another issue some individuals would like cleared up, is who or what determines the value of one single Bitcoin? The Bitcoin is very unique in the way of that you can break down a Bitcoin to smallest divisible amount of the number one, which is one hundred millionth of a Bitcoin. The value of Bitcoin is not backed by gold, or silver like most currencies used in the world. The price of this currency is purely based on mathematics. Top website supporter Coindesk.com had this to say about Bitcoins mathematic formula, “Around the world, people are using software programs that follow a mathematical formula to produce Bitcoins. The mathematical formula is freely available, so that anyone can check it. The software is also open source, meaning that anyone can look at it to make sure that it does what it is supposed to.” (Coin Desk)
I would also like to discuss the obvious question of, why would I want to use Bitcoin over any other traditional currency in the world? Some important extension of Bitcoin is its anonymous nature amongst other forms of payment. See Bitcoins are sent via “bit addresses” or otherwise known as electronic wallets that can hold and story your cryptocurrency. Your name, physical address, phone number, and all other personal information has no link to the transaction to Bitcoin. Appealing strongly to investors, and consumers who highly value privacy. Also, the fact that it can be processed super quickly due to being fully virtual is only plus. Making currency transfers, the purchase of products, and of all other transactions capable of being processed within seconds. Thirdly, and probably the most appealing factor to myself, is the notion that the fees associated with Bitcoin, and most forms of cryptocurrency are extremely minuscule.
Lastly, I wish to draw attention to the “darker side” of Bitcoins history. Bitcoins have been used throughout the internet, as many already know. However, within the internet realm, a lot people don’t know that users have been able to use Bitcoins for the transaction of illegal means, goods, and services for quite some time. This plays into the whole “anonymous nature” characteristic I was talking about earlier. The use of Bitcoin for bad intentions is nothing new to law enforcement either. Probably the most notable case of crypto-currency being used for illegal use is the acts committed on behalf of Ross Ulbricht, or otherwise known as “Dread Pirates Robert” throughout the TOR network. This man single handily created a website on hosted by servers broadcasted to the TOR Network. The name of this website was called “the Silk Road”. This website appeared to be “a craigslist for drugs”. Users could browse the web searching through a plethora of illegal drugs, weapons, pirated software, illegal services, and even counterfeits. Bitcoin in this situation with the Silk Road, was used as the method of payment for all the illegal interaction occurring on the web. One Silk Road user had the ability to click on any auction on the site hosted. Then could then choose to buy, for example, an illegal firearm. The individual purchasing the gun then uses the exchange of Bitcoins as payment. With all the madness taking place on Mr. Ulbricht’s servers, you could tell that they would eventually be stopped. In late 2011, this website was seized by FBI, and Ross Ulbricht was arrested in San Francisco, CA.
In summary, Bitcoin refers to electronic cash or currency that helps get business done online. It is considered cryptocurrency, and is based on cryptography and mathematic formulas. Bitcoins are changing the world, they have been used for good and bad, convenience and financially, and can be seen revolutionizing society as we know it. Bitcoin is obviously still in the early stages of its development, as it has only been present since 2009. With the help of everyone interested in Bitcoin, it is my hopes that the 21st century will forever be changed by the introduction of Bitcoin as a normal form of payment for the average person.
Sources:
"What Is Bitcoin?" CoinDesk RSS. CoinDesk. Web. 17 Nov. 2014.
<http://www.coindesk.com/information/what-is-bitcoin/>
"Cryptocurrency Definition." Investopedia. Web. 17 Nov. 2014. <http://www.investopedia.com/terms/c/cryptocurrency.asp>.
