What the Heck Is Bitcoin and Why Should I Care?
In the general sense, bitcoin is a cryptocurrency beginning to be used by more and more online businesses worldwide. Bitcoin isn’t bound by any geographic constraint and proponents say it can cross borders with ease, facilitating international trade.
Regarding investments – bitcoin is like other currencies and commodities, and faces the same battles as investments in gold, oil or fine art.
In simple terms – at any given time, bitcoin is worth what the market says it’s worth.
Currently, bitcoin is valued over 700 times the value than when the first bitcoin was created in 2010. To help put that into perspective – one of the first trades made by programmers experimenting with the technology, was for two Papa John’s pizzas. Laszlo Hanyecz paid Gavin Anderson 10,000 bitcoin in this exchange. Today, the value of those two pizzas is approximately $98 million dollars!
The bitcoin and “blockchain” paradigm were designed to solve a host of issues that the developers claimed were inherent in global, after hour, or immediate financial transactions. Blockchain technology (distributed ledger technology or “DLT”) they claimed, reduces the transaction costs and removes the dependencies on intermediaries.
They also contended that through the use of private and public keys (cryptography) and a decentralized network of global users, transactions could be executed immediately, to anywhere in the world (without exchange rates), without fear of fraud, and for a menial flat rate ($2 to $4). In other words, a bitcoin transfer made tonight would be available tonight without waiting for the banks to open in the morning.
Sounds great, right? Well, maybe.
First, of all, many experts believe bitcoin was originally created by criminals and fraudsters, to hide their transactions and potentially, illegal activities. Furthermore, there is nothing backing bitcoin, so that leaves many financial experts very leery of its security. And finally, it’s non-refundable. Meaning, when something is purchased with Bitcoin, there is no institution to turn to if you don’t get what you purchased or paid for, etc.
All this considered, the world really isn’t yet ready for bitcoin. And there are other considerations – or potential concerns – about bitcoin as well.
Regardless, the bitcoin rage seems to be growing. Over 125,000 merchants, worldwide are accepting bitcoin as a means of exchange. This includes Dell, Microsoft, Virgin Galactic and Tesla. To make bitcoin usage even simpler, Visa has created a Bitcoin visa that will allow the holder to transfer bitcoin with any merchant (or individual) that accepts it as payment.
And adopting bitcoin isn’t limited to merchants – as of May 2017, there were over 14 million blockchain wallet users. Because bitcoin is pseudonymous by nature, this number doesn’t directly translate to the number of individuals using blockchain – most have multiple accounts/addresses.
In September of 2016 it was estimated that the real number of users was between 2 and 4 million – which is still a very impressive number.
Oh, and let’s not forget academia – more colleges and universities, worldwide, are offering courses in bitcoin and cryptocurrency technologies. The University of Nicosia, in Cyprus, offers an entire master’s degree on digital currency. The University of Cumbria, in Europe, was the first institution to allow bitcoin for tuition and fees.
The bitcoin revolution may seem to be taking over the world, but again, there is reason to be cautious. There are several countries that have outlawed the currency.
The private/anonymous nature of blockchain, is of concern to many authoritative bodies. Their contention is that this type of financial transaction would only be necessary to those performing illegal actions. Conversely, staunch supporters of bitcoin and the blockchain distributed ledger technology, consider it to be a fundamental requirement and as justified as an individual’s constitutional right to privacy.
So… whether I or you consider bitcoin to be a flash in the pan, a bubble that will soon explode, or a natural evolution of global, financial transactions – bitcoin is making waves around the world. The truth of which one of those answers is correct, remains to be seen. Stay tuned and as always, I’ll keep you updated.