about bitcoin

Helpful Bitcoin websites:

A Podcast (Oct ’13) Alternate Realities with Bitcoins (Eric Stromberg, presenting guest):

What is Bitcoin?

  • Bitcoin is a decentralized digital currency invented in 2008 by the pseudonymous “Satoshi Nakamoto”, whose actual identity is generally unknown.
  • Bitcoin is a new form of money and payment system that lives on the Internet and is not backed or controlled by any government, company, person or other centralized entity.
  • Bitcoin balances and the ability to spent it are secured with strong cryptography.
  • Balances are recorded in a global peer-to-peer managed ledger called the “blockchain”.  Updated entries (“blocks”) are added approximately every 10 minutes on average by a process known a “mining”.
  • Mining requires massive specialized computational power, which secures the integrity of the ledger, prevents “double spending” and rewards miners with newly minted bitcoin.
  • Bitcoin can be purchased in marketplaces, global and local, received for goods & services or mined.
  • Current Bitcoin monetary base is ~$8B and 1 bitcoin = ~$600.  It has been over $1200.

Why Bitcoin?

  • Transactions can be sent anywhere almost instantly, cheaply and there are no “charge backs” possible.
  • The protocol / network is censorship resistant and makes seizure or devaluation of funds much more difficult or impossible for governments or other centralized entities.
  • Bitcoin is a “smart” digital form of money, programmable and flexible.

How can Bitcoin be used?

  • A limited but fast growing number of merchants accept Bitcoin as a form of payment.
  • At least eight Albuquerque businesses accept Bitcoin today.
  • At online merchants including: Overstock.com, TigerDirect.com, Gyft.com, (gift cards),…
  • There are also a lot of gambling and other “high risk” businesses (early adopters).
  • Multi-signature / escrow: can require 2 of 3 parties to sign Bitcoin transactions.
  • Exotic uses: Bitcoin can in principle be used to program and create things like “smart contracts” and “autonomous corporations”.

Bitcoin as an investment

  •  The prevailing view is Bitcoin will either grow massively, in both value & usage, or fail.
  • Speculation & investment drive much of the volume, price pressure and volatility today.
  • The earliest Bitcoin fund (Exante) showed a 5000% return last year.  $100M’s are being pumped into such funds (also, e.g. BIT / Second Market).

Bitcoin Security

  •  Use a “public key” (numbers & letters, often shown as a QR code) to receive bitcoin.
  • Having/knowing the “private” or secret key is the same as owning bitcoin, allowing you to spend it.
  • If your private keys are lost or stolen, your bitcoin value is likely lost to you.
  • Whole new categories of security requirements arise around Bitcoin.
  • Massive temptation and opportunity for digital, online thieves:
  • Already a rich history of hacks and thefts as a result.
  • These are made possible due to “user error” and/or poor security precautions.

Bitcoin, the future, regulation, governments

  • Bitcoin or another cryptocurrency will have a major role in our monetary and payments systems, globally, in the near future.
  • Legality and regulatory treatment in most countries is still in flux.
  • Selling bitcoin in the US as a business is generally “money transmission”.
  • Bitcoin is legal in the US, recognized by FinCEN as “convertible virtual currency”.
  • Some governments may try to outlaw/over-regulate…and drive it underground.
  • The U.S. seems to be trying to find a balance between regulation and innovation, but tending towards over-regulation.
  • Bitcoin may come to be used commonly used globally as “Programmable money”.