Bitcoin is a decentralized cryptocurrency founded by a mathematician, Satoshi Nakamoto. Essentially, it is a peer-to-peer currency network. If that doesn’t make sense, it’s the same as the US Dollar – without the centralized government maintaining and monitoring it.
Purchasing A Bitcoin
Last week I purchased one Bitcoin (BTC). I used a service provider called Coinbase. The U.S.-based company offers USD to BTC conversions by linking with your bank account. By giving them more information than you’d like to provide, they offer buying and selling capabilities to your real, concrete wallet. Even more, they just announced instant buying and selling.
After transaction fees, it cost me $84.98. Unfortunately, I had to wait about a week to receive the funds (prior to the instant development). This meant watching white-knuckled as the currency fluctuated between $90 and $65 over the week (on Bitcointicker.co). Just days before the transaction was complete, the conversion rate stood at $65 for one Bitcoin. I was looking at losing $20 in my little experiment – before I actually owned one.
Unregulated, Decentralized, Volatile
After reading Forbes writer Kashmir Hill try to live on Bitcoin for a week, I was inspired to learn more about this mysterious currency. Only a few months ago it was up to astronomical levels around $230. Now, it was hovering around $85. Why was there so much excitement and glee around a product that had no formal reserve or legal backing?
Here’s to hoping I survive on the virtual tokens that promise to make online transactions more anonymous and decentralized. No handing over your name and credit card number every time you make a purchase. It’s the online equivalent of paying cash. -Kashmir Hill, Forbes
All of a sudden, in April 2013, Bitcoin received one of the greatest media pushes ever. Everyone was talking about its potential and whether keeping money in the currency was a reasonable investment. The spike caused a wave of surprising outlets to start covering the currency. CNBC, The Atlantic, NBC, Fox, and many others were writing and featuring prominent people in the market. After the illustrious climb, BTC fell back down below $100, and much of the jubilee has quieted.
Due to its unregulated and decentralized status, Bitcoin offers governments around the world a significant challenge. What can they do to monitor a powerful cash-flow underneath the market? Meanwhile, the currency is becoming an increasingly popular method of payment at restaurants and with web services.
A Frugal Cryptocurrency
The grand appeal of Bitcoin comes from the liberated nature of buying and selling something that has no tax or transaction fee. Most payment processors (e.g., American Express, MasterCard, and Visa) charge lofty fees to merchants. This cost of convenience often gets passed onto the customer.
What Bitcoin has the potential to offer is the flexibility and ease of credit cards, with the fee-free nature of cash. The cryptocurrency could offer a win-win for customers and businesses. It could be a new, frugal way to spend and receive money if the infrastructure develops and people can gain interest and invest like traditional currencies.
The only reason more companies aren’t accepting the currency is the possibility of American intervention. The U.S. Government has the capability to block all transactions in and out for companies that deal in Bitcoin. That’s one nasty possibility.
What About My Coin And Yours?
On Wednesday, July 10th, I received the precious coin. Surprisingly, Bitcoin recovered and reached about $100 to the US Dollar. I decided to sell a fraction of the coin back, and have netted a funny little profit from the experiment. Honestly, the risk is scary, but seemingly reducing. With time, it may be comparable to what email has done to regular mail – dwarfed it. If proven safe with time, Bitcoin has the potential to reduce fees and create a more decentralized economy for all – a sort of international currency.
Will you ever use Bitcoins? What’s preventing you from buying into the currency?