Ever heard of bitcoin? If not, it may be because you don’t do much activity over the internet. More and more people are starting to use the currency and it is easy to see why. Bitcoins are a type of cryptocurrency that is completely anonymous. It allows you to make purchases online without compromising your identity over the net. Furthermore, you can even make them in your home.
Bitcoins are decentralized. This means there are no regulating agencies. There are no governments that regulate or produce bitcoins for their citizens to use. Rather bitcoins have a self-regulating system. They can be stored either on your computer or in the cloud.
No one really knows who created bitcoins. A person by the name of Satoshi Nakamoto published the specification for the first of them. After he or she did that, they stayed active for a little while longer online and then slowly faded from activity. This year, in 2015, Nakamoto was actually nominated for a Nobel Prize for the creation of bitcoins.
What is bitcoin?
In simple terms, bitcoin (abbreviated BTC) is a way of using encryption to create currency, so they can be called virtual money. The history of all transactions is shared in record books called a “block chain”. The block chains are checked to see if the transactions are validated. Bitcoins are reward for transaction verified. This process is called “mining” and anyone can do it.
One would think that the currency would grow to be over inflated in a short while with anyone being able to create a bitcoin. This isn’t the case. Only 21 million can ever be created. The more that bitcoins are mined, the less there will be. Still the current rate of 25 bitcoins created every ten minutes means that it will run out in the year 2140.
Why use bitcoins?
The main idea is that they take the middle man out. Transactions do not require anyone else other than the payer and the payee. Governments don’t like bitcoins because you can’t track transactions. If you can’t track transactions, you can’t track tax amounts. Other governments have even tried to ban the usage of bitcoins. China tried scaring their public in 2013 from using bitcoins. They managed to decrease it’s usage but didn’t manage to stop it.
The major advantage of using this type of payment is privacy. It keeps your identity secret over the net. There are major drawbacks to this. Not everyone takes bitcoin. Unless you do business online, it’s likely to give you any real advantages. It’s also volatile. The price of a bitcoins has fluctuated in the past. In 2014, the prices jumped to a record high but have since then leveled down. Today, one bitcoin equals about $360.02.
Bitcoins do have a negative connotation in some circles. Since they can’t be tracked, it makes them ideal for use in illegal activities. The Silk Road, which is a site that sells illegal drugs, deals with bitcoin. The FBI and over law enforcement agencies are still trying to keep up with and better their strategies on how to deal with money laundering involving bitcoins.