Bitcoins: The New Internet Currency And What You Should Know About It
So you’re probably sitting here wondering, “What the hell could possibly end cash?”
Well, bitcoins might, actually.
So let’s talk about bitcoins a little for those of you who are completely uninformed (like me).
What the hell is a bitcoin?
A bitcoin is, in essence, digital currency that doesn’t require a bank to transfer from person to person. The entire technology of a bitcoin is based on peer-to-peer open-source software (unlike bank software, as you know). The idea of a bitcoin has been around for several years, but it’s just now beginning to take hold.
You can exchange bitcoins from smartphones or computers. When you transfer a bitcoin, it’s divided into millions of smaller units (they call these ‘satoshis’) for easy and untraceable transfer.
There’s no central bank for this currency and there’s nothing controlling the economy of it either (yet). It relies completely on these peer-to-peer networks that verify the existence of the bitcoins being transferred through a server called a bitcoin miner.
Believe it or not, bitcoins are becoming valid in trade, and many international merchants accept them as payment. The most amazing part? People like bitcoins, and more than $1 billion USD in bitcoins exist at this moment, even though that’s a little debatable because the worth of a bitcoin fluctuates depending on the minute.
Why the hell are bitcoins so popular?
Story time, kids.
So recently in the UK, a bank decided that bank accounts exceeding a certain amount are subject to a “levy,” or, in essence, money stealing. Accounts with more than this predetermined amount (100,000 euros) face a levy of up to 60 percent, which of course is absolutely ridiculous. The entire idea of levying all uninsured amounts of cash at this bank happened because of a bailout agreement made for some 10 billion euros, but accepting the bailout meant it had to close its UK branch. The thing is that this bank was part of Cyprus banks (even though it was in the UK), and lots of rich folk use this bank as a “haven” from huge taxes, meaning that there was a huge, huge rush of people running to get their money out of the bank before it was “levied.”
And then there were a bunch of rich people standing around with oodles of cash and you know where some of them put it?
A bitcoin was suddenly worth $147 for a few days, then dropped back to $117. But as a fluctuating currency, bitcoin value continued to climb and reached $200 for the first time April 9 – a buttload compared to the all-time low in January of $10.50, which means that some of those people who hurried and put all of their money in bitcoins left it there. Actually, this fluctuation is why most people don’t think the bitcoin is going to survive very much longer, but it seems to be holding its own.
Why the hell should I care?
So the biggest reason you should care is because bitcoins are even more untraceable than Swiss bank accounts, and bitcoins can be transferred anonymously. It’s not as if transferring money anonymously hasn’t existed for a long time, but this particular way of ZIP filing cash is not only intriguing, but also very shady when it comes to embezzlement and money laundering.
Still, you can totally buy a Porche with bitcoins, and bitcoins are becoming more widely accepted at more online merchants as time marches by.
What the hell does this mean for me?
Well, at the moment, nothing. Banks still control the majority of the money in today’s economy, especially since they’re FDIC insured and can protect your money if their servers fail for a day. Bitcoin cannot, and carrying millions of bitcoins on a computer or a smartphone (a piece of technology that may decide to randomly kick the bucket) is extremely dangerous and could result in a loss of thousands and thousands of dollars.
Plus, if you ever want to spend your bitcoins on something that doesn’t accept bitcoins – say, food, or at a Toyota dealer – you can’t. And if someday you can and think that because you’re spending bitcoins your purchase can’t be tracked, think again. However, places like the Silk Road are popping up, which sell illegal things like drugs, fake IDs, and porn to those who have bitcoins to spend. In fact, they don’t accept any other form of currency.
For now, bitcoins remain interesting, and it’s a good idea to keep an eye on the development of a completely virtual form of payment. However, right now it’s more of a thing of intrigue and not so much a thing of actual worth. Keep your day job, bitcoins, because for right now you’re just cool and now all that practical.