With the Internet becoming all seeing, all knowing and all powerful, it was only a matter of time before it generated its very own currency. And that just about sums up Bitcoin – if you can get your head around all the other virtual aspects of the Internet world, then you should be able to come to terms with Bitcoin.
Bitcoins are not change that you can jangle in your pocket, give a tip in a restaurant or put into a slot machine. It is an electronic currency, public money for the digital age created by hyper-elaborate mathematical calculations. They are, believe it or not, electrical impulses translated into long streams of code which emerge with monetary value.
They are the only currency in the world to cross all political and physical borders. They owe no acknowledgement to any Government nor are they controlled by any central bank. As a consequence they are regarded with some suspicion because they give the general public the ability to make money away from Government supervision. They are the refuge of the (generally highly law abiding) individualist because their accounts are beyond the reach and the powers of examination and questioning from tax authorities and bitcoin accounts have no place in bank accounts. They cut out the middleman!
Bitcoins are thus virtual coins. No bank stores them or transports them. However once they become your property you can treat them as you would a treasure box of gold coins. Either they can be used to pay for the goods and services you require or they can be stored away in the hopeful expectation of growth in value. Bitcoins are not kept in the bottom drawer but in a Bitcoin wallet – not made of leather. This kind of wallet is a database unique to each Bitcoin owner which can be stored on a tablet, a smartphone or up in the cloud. A big bonus with bitcoins is that it would be so expensive to forge one that counterfeiters really aren’t interested!
Trade in Bitcoins goes between one wallet and another. At the moment it is calculated that there are more than two billion dollars’ worth of these coins knocking around and the cutoff point will have been reached when the magic number of 21 Billion coins have been created. Industry experts tell us that there is no great panic as of now as the expected completion date is around two decades ahead in 2040.
The collective name for the people with Bitcoins on (or should we say “in”?) their computers is “miners”. They audit transactions and are rewarded by earning more bitcoins for themselves.
Bitcoins, like every traded item in the world, go up and down in value. The value of each Bitcoin is its trading price – there is nothing in its elaborate construction that is of intrinsic value.
In short this is a currency which preserves anonymity and which carries only nominal costs for usage. Transferring Bitcoins is easier and cheaper than usual baking fees.