I can has Bitcoin?! For
buying drugs? Money to fuel terrorism? Internet Gold? Will Bitcoin steal my money? A digital cryptocurrency? Wtf? Protocol layer for exchanging value? Huh?
I promise it’s legit! But
don’t believe me… Source: WeUseCoins.com “I do think Bitcoin is the first [encrypted money] that has the potential to do something like change the world.” Peter Thiel, Co-Founder of PayPal “[Virtual Currencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” Ben Bernanke, Former Chairman of the Federal Reserve "Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.” Eric Schmidt, CEO of Google
A distributed p2p digital currency.
Digital cash that can be used to pay friends or merchants via the internet without any central authority controlling the exchange. It is transacted via a Bitcoin address and associated keys. Sample Private Key: Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KF Sample Public Key: 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy
Secured via a public ledger.
Bitcoin transactions go into a decentralized public ledger called the block chain which is protected with cryptography. Whenever a new Bitcoin transaction is initiated, miners earn Bitcoin to verify and record the transaction in the block chain and thus new Bitcoins are created.
Millions of Bitcoins will be
created. In Jan 2009, Satoshi Nakamoto, the creator of Bitcoin, mined the first block of Bitcoins ever (known as the “genesis block”) – getting a reward of 50 Bitcoins. Every four years of operation of the Bitcoin network, half the amount of Bitcoins created in the prior 4 years are created through mining. ~12M Bitcoins are currently in circulation. A total, final number of 21M Bitcoins will be created by 2140. Bitcoin is divisible by 8 decimal places – i.e. 0.00000001 BTC - called a Satoshi. Can be divided further if needed. Unique individuals that currently own Bitcoin maybe 1-5M.
Valued the same way as
“normal” money. Valuable because of utility and scarcity. No different than cash – depends on if people selling goods and services will accept it. Bitcoins are limited so value should go up and volatility should go down over time, since there will be fewer major owners and fewer major movements. Similar to stock market – fairly stable and few major crashes.
It is money created for
the digital age! You can’t exchange cash online without central authority like PayPal – and they have high fees and usability barriers. Credit Cards launched in the 1950s – not created for the internet! That is why there is fraud, chargeback issues, fees, require a lot of personal information, cv2 numbers, etc. They were retrofitted for the internet. No central authority with Bitcoin = much lower fees. No chargebacks because it is digital cash – once transferred, can’t be taken back. Fast international money transfer – pay family member in another country same way as your neighbor. No ridiculous fees like with Western Union. Little to no personal information required to send or receive Bitcoin since it is essentially cash. Protects you while still minimizing risk for merchant.
You can buy and sell
it easily. Can earn Bitcoin by mining, which requires large investment. Wiring fiat currency to an exchange like Bitstamp or a direct deposit from your bank account to a wallet like Coinbase to buy Bitcoins. Or by accepting Bitcoins as a merchant. Can hold in a offline wallet like Hive or online wallets like Coinbase, Blockchain.info or Bitpay. Can also hold in paper wallet or in cold storage. Think of it like cash - many ways to get and store your cash. Can sell your Bitcoin for fiat currency via exchanges and some of the wallets or even take money out using a Bitcoin ATM. US Tax laws have defined Bitcoin as property – so for now you pay capital gains taxes on it.
It is accepted in a
lot of places! Source: usebitcoins.info 10s of thousands of merchants accept it directly – Overstock, Zynga, Tesla, Square Market, Virgin Galactic, Wordpress, Reddit, some Subways, etc. Buy a gift card via Gyft using Bitcoin – use at Amazon, CVS/pharmacy, Dell, Fandango, Gamespot, Sears, Target, Home Depot, and many more. Bitcoin debit card providers such as Xapo and FreshPay will allow you to use it anywhere Visa and MasterCard is accepted.
But, its not all rainbows
and unicorns. Same risk as cash. Can be stolen if you don’t secure it safely (never give out your private key!). Price is volatile and will be for a while. Can’t be reversed. Can only be refunded by person who has it. It is NOT anonymous. Everything is recorded publicly. Can create new wallet addresses easily though. Still experimental and under active development. New changes will be adopted. Government taxes and regulation still uncertain.
Curious? Learn more! "Bitcoin isn’t
Money—It’s the Internet of Money” by Eli Dourado via THE ÜMLAUT http://theumlaut.com/2014/01/08/bitcoin-internet-of-money/ “Why Everybody Who Doesn’t Hate Bitcoin Loves It” by Greg Rosalsky via Freakonomics Radio Podcast http://freakonomics.com/2014/03/27/why-everybody-who-doesnt-hate-bitcoin-loves-it-a-new-freakonomics- radio-podcast/ “Bitcoin. Sweat. Tide. Meet the future of branded currency.” by Paul Kemp-Robertson via TEDGlobal 2013 http://www.ted.com/talks/paul_kemp_robertson_bitcoin_sweat_tide_meet_the_future_of_branded_currenc y “State of Bitcoin 2014 Report” via CoinDesk http://media.coindesk.com/report/CoinDesk-State-of-Bitcoin-2014.pdf “Professor Bitcoin” by Reihan Salam via The Vice Podcast http://www.vice.com/read/the-vice-podcast-professor-bitcoin "Why Bitcoin Matters” by Marc Andreessen via The New York Times http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/ “The Fifth Protocol” by Naval Ravikant via Startup Boy Blog http://startupboy.com/2014/04/01/the-fifth-protocol/