You have definitely heard a lot about Bitcoin. But…what is it all about? To cut it, Bitcoin is the most popular digital currency at the moment. The whole point is that the user is provided with an opportunity to use Bitcoin in order to pay for stuff without the necessity to approach a third-party broker. To make it simple, make sure to think about it like one huge ledger that is being shared by many users to complete many procedures: when one pays for something, or gets paid, the transaction is recorded directly on this very ledger. Then, the computers start competing to confirm the transaction though dealing with a range of math equations, and the winner gets the desired Bitcoins. That’s what the field experts call the ‘mining’. But there is no need to get too excited since only the computer powerhouses can get the Bitcoins that way.
So, what’s the idea? The digital currency made its debut in 2009, when the financial crisis broke out. The idea behind it was to deprive the central bankers and governments from power to control currency flow.
As for the creators of the Bitcoin reference and protocol software, an individual or a group of them known as ‘Satoshi Nakamoto’ stand behind it. However, there are still bitter debates over who actually was the inventor. While some sources insist on the personality of 64-year-old Dorian Satoshi Nakamoto from LA, the others claim the man denied all sorts of facts regarding him being related to Bitcoin issues.
To start using Bitcoins, the user is supposed to install the ‘Bitcoin wallet’ app on the PC or telephone. Then, he or she can do the so-called ‘Bitcoin exchange.’
Using digital currency is possible in a few places such as the dating web site OkCupid or the Sacramento Kings. Zynga and Overstock.com are at the testing stage with the Bitcoin. Besides, the Winklevoss twins preferred Bitcoin to purchase tickets for the Richard Branson’s rocket ride.
What is so cool about Bitcoin, you may ask. It’s better to probably approach supporters to get the desired information. First of all, they will tell you the currency is a great option for the small businesses. Thing is, the stores are required to pay a specific fee to the card industry the very moment a client swipes a debit or credit card in order to cover the transaction processing cost. However, the fees like that tend to shrink when the clients use Bitcoin for the reason that the transactions are being processed by the competing computers.
The other idea comes from the fact that Bitcoin can be used by online users in developing countries, who do not have bank accounts, but use cellophanes instead. Or, as the founder of Bitcoin Investment Trust Barry Silbert said, those users, who live in the countries, where official currency tends to plunge, might consider Bitcoin as the gift from heaven. To add more, Bitcoin payments happen to be anonymous, which is a great advantage for the individuals, who care about confidentiality.
No one can really tell how the Bitcoin can be regulated, or who should be entitled to do that. But the truth is once a range of heavy regulations are imposed Bitcoin won’t be Bitcoin anymore.
References:
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- Back, “Hashcash – a denial of service counter-measure,” http://www.hashcash.org/papers/hashcash.pdf, 2002.
- H. Massias, X.S. Avila, and J.-J. Quisquater, “Design of a secure timestamping service with minimal trust requirements,” In 20th Symposium on Information Theory in the Benelux, May 1999.
- J. Camenisch, S. Hohenberger, and A. Lysyanskaya. Compact e-cash. Proc. Eurocrypt, 2005. 9.
- S. Canard and A. Gouget. Divisible e-cash systems can be truly anonymous. Eurocrypt ’07.
- K. Poulsen. New malware steals your bitcoin. wired.com/threatlevel/2011/06.
- F. Reid and M. Harrigan. An analysis of anonymity in the bitcoin system. Arxiv:1107.4524.
- M. Babaioff, S. Dobzinski, S. Oren, and A. Zohar. On bitcoin and red balloons. research.microsoft.com/pubs/156072/bitcoin.pdf, 2011.