Seen all the hype around ‘Bitcoin’ and have no idea what the heck is going on? Us too. Luckily, we dug around and discovered the basics about the cryptocurrency everyone seems to be talking about.
Back to Basics
Bitcoin is a cryptocurrency, aka a type of digital currency. It was the first cryptocurrency to exist (others have been released since, and are nicknamed Altcoins). So far, so good…
The cryptocurrency is created by mathematical computations and managed by computer users all over the world, who are known as ‘miners’. Apparently not the ones that dig large holes and stuff.
These miners are in fact a big network of peeps who use their computers to act as regulators/auditors for Bitcoin transactions. They are paid by earning new bitcoins themselves! The actual ‘mining’ involves using a (very strong) computer to solve intensive math problems. Only 21 million total bitcoins can ever exist, with around 11 million already ‘mined’ and circulating. Computers, hey!?
The actual value of one single Bitcoin changes daily, and is decided by open Bitcoin ‘exchanges’. These are networks that allow users to buy and sell their bitcoins with different currencies, such as the Aussie dollar (Coinbase and Bitstamp are some examples). WILD!
Who started the party?
Bitcoin was actually created by someone with the alias Satoshi Nakamoto. Nakamoto created the basic Bitcoin model, released in 2009. However, in a major plot twist, he basically disappeared off the planet two years later. Although many people have claimed to be Satoshi, no one has actually been confirmed as the real one. Truth really IS stranger than fiction!?
Storage and such
Bitcoins are traded from one ‘wallet’ to another. This digital wallet can be stored on a person’s own computer drive/hardware (known as cold storage). The other option is to store your coinage on the Internet (hot storage). This second option has a higher risk of theft, however if you lose the hardware you’re storing your Bitcoin in (or access to it), your dollar dollar bills are gone – forever. So don’t forget your password. Once you make a transaction, you can’t reverse it either – no return policy peeps! Savage.
Bitcoin transactions are recorded on a ledger known as a blockchain. Every transaction is recorded on this public ledger, which helps prevent dodgy activity and scams (e.g. people doubling up on transactions or digitally copying Bitcoins). Whilst public, the actual names of buyers and sellers are undisclosed, keeping transaction details private, yet harder to trace.
Why the fuss?
From what we can gather, Bitcoin has graced our news feeds (rather aggressively) in recent times for a few key reasons. For starters, between 2011-2013, Bitcoin was used A LOT by criminal traders to move millions outside the eyes of the Po-Po. This increased its value!
The cryptocurrency also drastically reshapes how we store and spend our wealth, by removing power and control from big banks as well as national governments. This has the potential to send ripple effects throughout all industries/society in general, as whilst for decades central banks have controlled our money (printing, storing, transferring, etc. – love you Combank App), with Bitcoin the power shifts back to the individual. No paper dollars or virtual bank balances, but data chains with value! What a time to be alive.
Do we have a future together?
No one really knows what will happen to Bitcoin and other cryptocurrencies. Whilst many agree we’re on our way to a cashless economy, a widespread digital currency is not necessarily sustainable or government-approved. The system is dependent on enormous computing power, which will take time to implement. Governments are also taking issue with the anonymity of the system, concerned about the lack of oversight and tax regulation (as well as the high risk of scams and illegal activity).
As always, time will tell! In the meantime, our NetBank app is suiting us just fine. We just wish it would stop reminding us that the most money we’ve spent this month was on food.