This week’s topic is “Bitcoin”. Bitcoin was created to take power out of the hands of government and central bankers, and put it back into the hands of the people. Bitcoin is a network that enables a new payment system and completely digital money. In other words Bitcoin is pretty much like cash for the Internet.
Virtual currencies were developed because of trust issues with financial institutions and digital transactions. Though they aren’t considered “money” by everyone, virtual currencies are independent of traditional banks. There are three terms that are sometimes used interchangeably. They are:
Virtual Currency – A medium of exchange that operates like a currency used in some environments, but does not have all the attributes of real currency. Virtual currency does not have legal tender status in any jurisdiction.
Digital Currency – A form of virtual currency that is electronically created and stored. Bitcoins are considered digital currency.
Crypto-Currency – A subset of digital currency that uses cryptography for security so that it is extremely difficult to counterfeit plus, they are not issued by any central authority.
Since bitcoin is decentralized, there are legalities that differ in every country. Law enforcement and tax authorities are concerned about the use of crypto-currency because of its anonymity and the ease of using money for laundering and other illegal activities. The US Security Exchange Commission (SEC) often warns about investment schemes and fraud.
Let’s look at some key advantages and disadvantages.
- Freedom in Payment – Ability to send and receive money anywhere in the world without crossing any borders, rescheduling for bank holidays, or any other limitations.
- Information is Transparent – The public address is the I.D. that is visible; however, personal information is not tied to this. Transactions can be verified by anyone at any time.
- Very Low Fees – Currently there are either no fees, or very low fees with payments. Some transactions include fees in order to process the transaction quicker. The higher the fee, the more priority it gets within the network.
- Fewer Risks for Merchants – Merchants are protected from potential losses that might occur from high crime rates or fraud.
- Lack of Awareness & Understanding – Many people are unaware of digital currencies and Bitcoin.
- Risk and Volatility – The price of a bitcoin is determined by supply and demand. When demand for bitcoin increases, the price increases, and when demand falls, the price falls. The value of bitcoin in circulation and the number of businesses using bitcoins are still very small compared to what they can be. Therefore, relatively small events, trades, or business activities can significantly affect the price.
- On-Going Development – To make the digital currency more secure and accessible, new features, tools, services are currently being created.
There are many questions and concerns about this technology. Bitcoin continues to evolve because it is a new kind of currency and it will take some time until it becomes more widely used. People are still learning about digital currencies without having any pre-conceived notions that can be distorted.
I hope you found this information helpful. Please feel free to forward it to others. If you would like to learn more about this topic or would like to request a topic, please contact me. If you missed any past newsletters or would like a printed copy, please visit my website www.mdsystemsolutions.com.
Until next time…Happy Computing!!!
I have worked is various positions as a system administrator, support technician, as a help desk support, and as an IT consultant in a corporate environment. I currently run a small business where I provide computer services such as hardware configuration, installation, for residential and for medium and small businesses. You can contact me by email or visit my website at https://www.mdsystemsolutions.com.