A relatively new currency has made an online presence over the past few years. Known as bitcoin (BTC), it has been both praised and heavily criticized by experts and consumers alike.
Bitcoin is an online payment system that can be used by anyone. Bitcoins can be obtained through mining, selling products, offering services or paying for them. They are stored using a digital wallet stored on a user’s computer or smartphone. It is considered risky because of its use in criminal activity, its lack of a central institution and constant fluctuation.
Many users prefer Bitcoin over traditional forms of online payment because it can be done anonymously. Consumers do not need a credit card tied to their name.
Bitcoin was founded in 2009 by Satoshi Nakamoto, although no one knows if Nakamoto is a person or a group of people.
A record of all bitcoin transactions, called a blockchain, are kept. Users can then devote computer power through their GPU to solve an irreversible math problem, called a hash. This verifies the transactions on the blockchain. This is called mining, and 25 bitcoins are rewarded to someone every ten minutes through this process.
These payouts are rewarded to miners because it makes the system more secure. The payouts are halved every four years, and will until some time between 2110 and 2140 when 21 million BTC are in circulation. Due to this system, Bitcoin has a naturally deflationary value.
As of July 2014, there were 13,349,775 BTC in circulation. The value of bitcoin has been known to fluctuate heavily. In late November 2013, the value of one bitcoin rose to an all-time high of $1,242. Currently, the value is at $384.73 per bitcoin.
Due to bitcoin’s unstable value and lack of central regulation, it has been banned in five countries: Bolivia, Bangladesh, Ecuador, Iceland and Kyrgyzstan.
Alexander Graham, a junior business major, believes that bitcoin is exciting because its community is ran by people with a huge interest in the product.
“The beauty of alternative currencies as a whole is that it forces traditional institutions to practice more logical monetary practices, thus strengthening the mainstream economy,” Graham said. “Alternative currency can also act as a sense of liberation, freeing individuals from the mainstream economy.”
Graham had bitcoins stolen from his digital wallet several years ago, but has since learned how to be secure.
“As awesome as Bitcoin is, it’s extremely easy for your wallet to get hacked if you’re careless,” Graham said. “You don’t have banks spending money on high end security systems, so it’s very important that you take your computer’s security seriously. If you’re going to get involved with Bitcoin, you must make that paramount.”
In 2011, Graham went to lose about $150 in bitcoins within a week of purchasing them.
“It was my fault, really,” Graham said. “Even though Bitcoin is run by a helpful community, there are people who will try to rob you, just like in any community.”
Michael Blackmer II only had good experiences using Bitcoin.
“My first experience using Bitcoin was from a simple commision piece for my friend’s photography business,” Blackmer said. “He asked me for a watermark logo for his photos and knew I had some experience in graphic design. Instead of using the popular services of PayPal or Western Union, he suggested to pay me in bitcoin, which would immediately give me the payment without problems.”
Creating a bitcoin wallet took less than five minutes for Blackmer, and his payment arrived shortly ever. Due to Bitcoin’s easy process of transferring money for services, Blackmer tries to encourage everyone to invest in Bitcoin.
“If you put 5 to 10 dollars a month into bitcoins, it can go a very long way. It’s the safest way to transfer money for goods and services while cutting out the middle man and different fees that we are faced with everyday,” Blackmer said. “I encourage everyone to read into its benefits and collect good information without judging it as an unbalanced form of currency and more of a safe way to trade for services and goods over the Internet.”
