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Everybody is talking about Bitcoin these days. But unless you are a tech nerd (or drug dealer) you probably don’t...
Everybody is talking about Bitcoin these days. But unless you are a tech nerd (or drug dealer) you probably don’t know a whole hell of a lot about it. In spite of a fringe existence, Bitcoin is a very real currency and it’s here to stay. Let us give you the what-and-why:
Bitcoin is a digital form of money that is independent of any bank, nation, or centralized authority. It’s what’s known as a crypto-currency, which uses intricate codes to control both the creation of every Bitcoin as well as its exchange between two parties. Because of the complexity of the algorithms it’s very difficult to both create fake Bitcoins or to disrupt a transaction.
Very basically, Bitcoin works by using the entire network of users in something called a block chain, which includes every legitimate transaction in an encrypted ledger; each Bitcoin wallet has its own private key. When people exchange Bitcoins, they are checked against the ledger for fraud, a process that takes about an hour. If it’s legit, the Bitcoins are moved from one wallet to the other.
You can also make money, literally, through a process called mining, that allows computers in the block chain to contribute their CPUs to process the algorithms. In exchange for their service, “miners” are rewarded in Bitcoins. It takes a lot of harnessed computer power to efficiently create a Bitcoin and clever geeks have created huge server farms in an attempt to mine Bitcoin fortunes.
With government spying on everybody’s mind, the good thing about Bitcoin is that it is totally private. And without a specific entity in charge, it’s very difficult for it to be manipulated, stolen, devalued, or controlled.
This, of course, also makes it a great means of exchange for drug lords and money launderers, and, as such, it has been the ire of the FBI. Recently, they shut down Silk Road, a massively popular underground website, where people used Bitcoins to buy drugs, driver’s licenses, and other shady items.
But the upside is this helps foster overall legitimacy for Bitcoin, as the currency suffered only a minor devaluation from the seizure. In addition, two companies recently announced plans to ship Bitcoin ATMs to the US and a dozen other countries, making it easier for ordinary people to convert Bitcoins to paper currency, and vice-versa. Currently, there are 11 million Bitcoins in circulation, worth approximately $125 each. As recently as 2011 they were valued at only $2 a coin.
So, if you want to have more privacy and possibly make money using an alternative way to bank, keep an eye on Bitcoin. It could very well change the way the entire world does business.