First Things First, What is Bitcoin?
Bitcoin is a decentralized digital currency based on an open-source, peer-to-peer internet protocol. In more simple terms, bitcoins may be purchased and exchanged by a consumer through a personal computer without the involvement of a central bank. Instead of being issued by a government or private company, Bitcoin is a currency run by computer code which distributes new bitcoins at a fixed rate to web servers who are devoted to keeping the code running. Users can access exchange sites where they are able to transfer fiat money, ex. US Dollars, for the digital currency. Started in January of 2009, Bitcoin recently reached its highest valuation ever at a price of 90 US Dollars per bitcoin.
The rise of Bitcoin, Correlation or Causation?
As banks in Cyprus are threatening taxation of bank accounts as a method of helping with their economic crisis, the bitcoin has seen a rise in value from around $15 in January of 2013 to around $90 currently. Many europeans fearing similar proposals in countries such as Portugal and Greece have invested large amounts into the virtual currency. This could be viewed either as correlation or causation, but only time will tell.
The Benefits Of Bitcoins
There are many advantages to Bitcoins. They are easy to transfer, to secure, to verify, and to granulate. They are not debt based and do not rely on a central authority. Compared to other electronic fiat moneys, they are potentially anonymous, and both faster and cheaper to transfer. By being a decentralized system, bitcoins cannot be printed at the subjective whims of the their controllers, they cannot be destroyed by attacking a central point of control, and are not subject to arbitrary rules imposed by controllers.
In conclusion Bitcoins can be a successful alternative to fiat currency, but only if a large majority of the network backs the system. As bank’s practices become increasingly unattractive to consumers, bitcoins can see an increase in usage and in the process, a strengthening of its system.