According to the PC Mag Encyclopedia Bitcoins are “a virtual currency that is not sanctioned by any government.” There’s no centralized bank or reserve and they’re not backed by any one country or person.
According to Bitcoin.org the digital currency first appeared in 2009. They were introduced by a mysterious figure known as Satoshi Nakamoto. In 2010 Nakamoto abandoned the project and never revealed his or her identity.
Bitcoins can be bought, traded, or earned. You can buy or trade Bitcoins online or face to face using a local directory. Bitcoins can be earned by accepting them as currency or by “mining.”
According to Bitcoin.org, mining “is the process of making computer hardware do mathematical calculations for the Bitcoin network.” Miners then collect fees for confirmed transactions, along with newly created Bitcoins. It’s not easy to make money this way. Miners are paid based on how much of the computation they complete. New Bitcoins are handed out based on a system that resembles the lottery.
Bitcoins offer some advantages over traditional currencies. One is that you can receive unrestrained payments. It’s possible to get any amount of money, from anywhere in the world, at any time. There are no bank holidays, no borders, and no limits.
Other advantages include zero or low transaction fees and complete anonymity. No personal information is needed for Bitcoin transactions. Some believe this offers protection against identity theft and makes it impossible for merchants to force unwanted or unnoticed charges like with automated debits, debit cards, Pay Pal™ and credit cards.
But of course there are two sides to every Bitcoin. The biggest problem is that Bitcoins are extremely volatile. Technical glitches, speculation, and fraud cause the value of Bitcoins to rise and fall quickly. While writing this blog, a singular Bitcoin was worth $105.98 USD. That’s down significantly from the virtual currency’s all-time high of around $266 in late March. But it’s still significantly higher than the three-tenths of a cent it originally traded for back in 2010.
Since Bitcoins are a decentralized, digital currency you can’t take them to the bank. Bitcoins are stored on your computer’s hard drive or online in a digital wallet. Both are attractive targets for hackers. Storing your Bitcoins in a digital wallet may seem safer. But like your physical wallet (and unlike banks)—it doesn’t have insurance.
Finally, Bitcoins are not accepted everywhere and their anonymity makes them an attractive currency for people looking to buy illegal items online.
About Barclay Pollak
Barclay Pollak is an award winning journalist and proud to be a member of the Corporate Communications team at TDS Telecommunications Corp. (TDS®) in Madison, Wis. Barclay joined the team in April of 2013. Before that Barclay worked as an Anchor/ Reporter for the NBC affiliate in Madison. While at NBC-15 Barclay was recognized by several organizations for his contributions to the television news industry. They include the Wisconsin Broadcasters Association, the Radio Television Digital News Association (Edward R. Murrow Regional Award) and the Chicago/Midwest National Academy of Television Arts and Sciences (2012 Emmy Nominee). When he’s not working Barclay enjoys cheering for all the sports teams in Wisconsin. Barclay’s a University of Wisconsin-Madison alumnus and a huge fan of Badger athletics. Barclay is fascinated by the ever changing world of technology and spends a fair amount of his free time reading about the latest and greatest developments online. When Barclay’s not learning about technology he’s scouring the Internet in search of freeware. Barclay has an 8-year-old daughter and lives with his girlfriend of almost five years on Madison’s southwest side.