Arrival of an Internet currency
Source: By Sanjeev Bansal: The Tribune
ONE of the most disruptive, exciting and contentious new developments in global economics is the onset of bitcoin as a legitimate, prevalent currency. It has instigated an intense debate about the future of the world economy. Bitcoin is erected on the concept that money is any object, or any kind of record, acknowledged as payment for goods and services and repayment of debts in a given nation or socio-economic grouping. Bitcoin uses cryptography, or mathematical equations, to regulate the creation and transfer of money, rather than relying on governments and central banking authorities. Transfers for mortgages, sales, purchases or any other ways of payment can be processed by anybody, using a desktop, smart phone, tablet, or laptop. This is all conceivable without the prerequisite for a financial institution to act as an intermediary. Hence, bitcoin is a virtual commodity that has many properties similar to traditional cash. Utilising strong cryptography and a peer-to-peer network, it serves as the first currency without a central issuing authority. Bitcoins are not physical entities, but work in virtually the same way.
Bitcoin was created in 2009 and is a digital coinage introduced as an open source software by an MIT student named Satoshi Nakamoto. There is considerable speculation as to whether Satoshi is an actual person, or an assemblage of individuals using a pseudonym. Bitcoins are minted by a process designated as mining, in which specialised computer hardware complete complex mathematic equations and are rewarded with a block of bitcoins. This process takes around 10 minutes and the current block rewards 25 bitcoins. The block reward will be halved to 12.5 bitcoins in 2017 and again roughly every four years thereafter. By 2140 there will be roughly 21 million bitcoins in existence.
For those interested in using bitcoin as a vehicle for foreign exchange, a variety of platforms currently exist which allow for intra-currency trading. Some of the larger platforms are Kraken, Mt.Gox, VirWox and Intersango. Each of these exchange vehicles features a unique set of services and stipulations. Security plays an incredibly important role in bitcoin trading due to both the intangible nature of the currency and the lack of a comprehensive regulatory infrastructure for the exchanges. That being said, these currency exchange software platforms attract countless visitors, the vast majority of whom are able to engage in transactions without trouble.
A whirlwind of activity has been noticed in the recent past with business owners of all stripes getting on track with bitcoin. From small businesses in New Orleans to the Sacramento Kings of the NBA accepting bitcoin for ticket sales, to casinos in Las Vegas, bitcoin is popping up ubiquitously. Venture capitalist Chris Dixon believes bitcoin may touch $100,000 if it develops as the prime means of e-commerce. At present the bitcoin market is growing by 30 per cent per month. Zynga Games, one of the largest online gaming companies, responsible for Farmville, Castleville, and a host of others also began accepting bitcoin for in game financial transactions. The IRS has also launched a campaign that allows taxes to be paid with bitcoin. There has been bitcoin ATMs popping up in cities such as Vancouver, Ottawa and a Bratislava Slovakia shopping mall. Recently, the New York City bitcoin ATM was put on hold until a public hearing under the jurisdiction of the New York State Department of Financial Services can be held.
The value of bitcoin is typically very volatile due in large part to the fact that the currency is a popular tool for individuals exchanging illegal services who wish to remain anonymous. Recent government-backed seizures of bitcoin have caused the value of the currency to fluctuate greatly. That being said, the per-unit value of bitcoin has risen astronomically over the past two years. After flirting with the $1,000 value just after the New Year, bitcoin has been steadily trading at around $950 on the Mt. Gox exchange over the last fortnight and is being nicely supported by the 50-day moving average, indicating bitcoin is still decidedly bullish. This was surprising to most analysts who believed the regulatory news coming out of China, India and Russia would burst the bitcoin bubble. However, keeping in view that bitcoin is beating the 50-day moving average, it may be generalised that Bitcoin is an extremely healthy market, and should only continue to increase in value.
A few of the benefits brought by bitcoin are seen in effective markets. A bitcoin can be divided into millions of parts (every part is called satoshi); the fiat currency is normally broken down in hundreds). The transactions in this network are free, or in some cases include a tiny transaction fee in order to induce the miners. But we are speaking of approximately a tenth of one per cent. If you are to compare this with a 2 or 4 per cent fee that is generally charged by the credit card companies, you will understand why this concept is so attractive.
Bitcoin has the power to become a great force in the financial industry. The scenarios are numerous, and they all seem to support the idea that bitcoin will retain its value, even if the fiat currency of a weak central government is consumed by hyperinflation. And we shouldn't fall into a pessimistic mood, even if there are some recorded cases of people selling valuable items in order to buy bitcoins. All things considered, the bitcoin monetary system can easily coexist with the traditional currencies existent in the world.
Bitcoins are fungible assets with durability, portability, divisibility and scarcity, i.e., they have all the characteristics of conventional money (euros, dollars, pounds etc). They have value so they can be exchanged for other currencies at exchanges. Therein lies the danger. There are times when the value of bitcoin can fluctuate widely, by 50 per cent in one day. So, as a store of value, they are not for the faint-hearted. In other words, you should not have more money than you can afford to lose in the form of bitcoins.
However, a wallet with small amounts of bitcoin in it can be used for minor day-to-day transactions which would help familiarise you with Internet currencies. As the amount of bitcoins in circulation increases, their value vis-a-vis other currencies should stabilise and you can start using them for larger transactions.
ONE of the most disruptive, exciting and contentious new developments in global economics is the onset of bitcoin as a legitimate, prevalent currency. It has instigated an intense debate about the future of the world economy. Bitcoin is erected on the concept that money is any object, or any kind of record, acknowledged as payment for goods and services and repayment of debts in a given nation or socio-economic grouping. Bitcoin uses cryptography, or mathematical equations, to regulate the creation and transfer of money, rather than relying on governments and central banking authorities. Transfers for mortgages, sales, purchases or any other ways of payment can be processed by anybody, using a desktop, smart phone, tablet, or laptop. This is all conceivable without the prerequisite for a financial institution to act as an intermediary. Hence, bitcoin is a virtual commodity that has many properties similar to traditional cash. Utilising strong cryptography and a peer-to-peer network, it serves as the first currency without a central issuing authority. Bitcoins are not physical entities, but work in virtually the same way.
Bitcoin was created in 2009 and is a digital coinage introduced as an open source software by an MIT student named Satoshi Nakamoto. There is considerable speculation as to whether Satoshi is an actual person, or an assemblage of individuals using a pseudonym. Bitcoins are minted by a process designated as mining, in which specialised computer hardware complete complex mathematic equations and are rewarded with a block of bitcoins. This process takes around 10 minutes and the current block rewards 25 bitcoins. The block reward will be halved to 12.5 bitcoins in 2017 and again roughly every four years thereafter. By 2140 there will be roughly 21 million bitcoins in existence.
For those interested in using bitcoin as a vehicle for foreign exchange, a variety of platforms currently exist which allow for intra-currency trading. Some of the larger platforms are Kraken, Mt.Gox, VirWox and Intersango. Each of these exchange vehicles features a unique set of services and stipulations. Security plays an incredibly important role in bitcoin trading due to both the intangible nature of the currency and the lack of a comprehensive regulatory infrastructure for the exchanges. That being said, these currency exchange software platforms attract countless visitors, the vast majority of whom are able to engage in transactions without trouble.
A whirlwind of activity has been noticed in the recent past with business owners of all stripes getting on track with bitcoin. From small businesses in New Orleans to the Sacramento Kings of the NBA accepting bitcoin for ticket sales, to casinos in Las Vegas, bitcoin is popping up ubiquitously. Venture capitalist Chris Dixon believes bitcoin may touch $100,000 if it develops as the prime means of e-commerce. At present the bitcoin market is growing by 30 per cent per month. Zynga Games, one of the largest online gaming companies, responsible for Farmville, Castleville, and a host of others also began accepting bitcoin for in game financial transactions. The IRS has also launched a campaign that allows taxes to be paid with bitcoin. There has been bitcoin ATMs popping up in cities such as Vancouver, Ottawa and a Bratislava Slovakia shopping mall. Recently, the New York City bitcoin ATM was put on hold until a public hearing under the jurisdiction of the New York State Department of Financial Services can be held.
The value of bitcoin is typically very volatile due in large part to the fact that the currency is a popular tool for individuals exchanging illegal services who wish to remain anonymous. Recent government-backed seizures of bitcoin have caused the value of the currency to fluctuate greatly. That being said, the per-unit value of bitcoin has risen astronomically over the past two years. After flirting with the $1,000 value just after the New Year, bitcoin has been steadily trading at around $950 on the Mt. Gox exchange over the last fortnight and is being nicely supported by the 50-day moving average, indicating bitcoin is still decidedly bullish. This was surprising to most analysts who believed the regulatory news coming out of China, India and Russia would burst the bitcoin bubble. However, keeping in view that bitcoin is beating the 50-day moving average, it may be generalised that Bitcoin is an extremely healthy market, and should only continue to increase in value.
A few of the benefits brought by bitcoin are seen in effective markets. A bitcoin can be divided into millions of parts (every part is called satoshi); the fiat currency is normally broken down in hundreds). The transactions in this network are free, or in some cases include a tiny transaction fee in order to induce the miners. But we are speaking of approximately a tenth of one per cent. If you are to compare this with a 2 or 4 per cent fee that is generally charged by the credit card companies, you will understand why this concept is so attractive.
Bitcoin has the power to become a great force in the financial industry. The scenarios are numerous, and they all seem to support the idea that bitcoin will retain its value, even if the fiat currency of a weak central government is consumed by hyperinflation. And we shouldn't fall into a pessimistic mood, even if there are some recorded cases of people selling valuable items in order to buy bitcoins. All things considered, the bitcoin monetary system can easily coexist with the traditional currencies existent in the world.
Bitcoins are fungible assets with durability, portability, divisibility and scarcity, i.e., they have all the characteristics of conventional money (euros, dollars, pounds etc). They have value so they can be exchanged for other currencies at exchanges. Therein lies the danger. There are times when the value of bitcoin can fluctuate widely, by 50 per cent in one day. So, as a store of value, they are not for the faint-hearted. In other words, you should not have more money than you can afford to lose in the form of bitcoins.
However, a wallet with small amounts of bitcoin in it can be used for minor day-to-day transactions which would help familiarise you with Internet currencies. As the amount of bitcoins in circulation increases, their value vis-a-vis other currencies should stabilise and you can start using them for larger transactions.
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