Helpful Bitcoin websites:
- bitcoin.org (“original” Bitcoin website)
- coindesk.com/information (great beginner’s guide)
- abqbitcoins.com (local, good links, list of local merchants, etc)
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.
- 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).
- 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”.