What is Bitcoin?
Other than something that sounds like the name a four-year-old would name his private parts, Bitcoin is a digital token that can be sent electronically from one user to another.
Bitcoin is both the name of the network and the actual digital tokens. Unlike traditional payment networks like Visa or American Express, no single company or person runs the Bitcoin network. Instead, it is a decentralized network of computers around the world that keep track of all Bitcoin transactions, much like the decentralized network of servers that makes the internet work.
Not in any way, shape, or form originally designed for drug dealers who didn’t want to leave a paper trail, there is no central authority running Bitcoin. Identities over ownership are completely anonymous, and it was purposely created this way so that Bitcoin currency could not be regulated by any form of government or company. Again, in no way is it sketchy, borderline illegal and made so that illegal activity can’t be tracked. Bitcoin wants to make that very clear.
Computers that participate in the network and track Bitcoin transactions are inclined to do so by the new coins that are released to the network every 10 minutes by god knows who or what. The coins are then given to one of the computers helping track the transactions and maintain the network.
Hackers particularly love Bitcoin because they can demand it for ransom without worrying about their identity being released or having the federal government intervene (as this form of currency is not yet recognized by the federal reserve). Essentially, it would be like having ghosts rob your house of nothing but you’d still feel the financial ramifications.
For criminals, Bitcoin is more attractive than systems like Western Union (although, in all fairness, a random root canal at the DMV is more attractive than dealing with Western Union). This is because those financial systems require identification.
How do I buy Bitcoin?
There are companies in most countries that will sell you Bitcoin in exchange for the local currency. Although, I’d be willing to wager that you couldn’t find a place to do it in Rwanda. If I’m wrong, I’ll give you a Bitcoin.
In the United States, a company called Coinbase (seriously, it’s like they got a four-year-old to name this stuff!) will link to your bank account or credit card and then sell you the coins for American dollars. Opening an account with Coinbase is similar to opening a traditional bank or stock brokerage account, with lots of verification of your identity needed, which seems to defeat the whole purpose behind the anonymity of Bitcoin.
For people who do not want to reveal their identities, there are services like LocalBitcoins that will connect local people who want to buy and sell Bitcoin for cash, generally without any verification of identity required. I repeat, THIS IS NOT INTENDED FOR DRUG DEALERS OR ANY ILLEGAL ACTIVITY.
To start accepting Bitcoin is even easier. One only needs to create a Bitcoin address, which can be done anonymously by anyone with internet access. I chose the address Iheartbitcoin@bitcoin.com. I thought it had a nice ring to it and sound unsuspicious.
The price of Bitcoin fluctuates constantly and is determined by open-market bidding on the internet exchange, similar to the way that stock and gold prices are determined by bidding on exchanges.
Can the authorities track people using Bitcoin?
All Bitcoin transactions are recorded on the network’s public ledger, known as the blockchain. Law enforcement or financial authorities can sometimes use the blockchain to track transactions among crimin- I mean, law abiding citizens. So long as the LAW ABIDNG CITIZENS do not associate a real-world identity with their Bitcoin address, they are generally safe. Complicating matters further, there are increasingly sophisticated Bitcoin laundering services, known as tumblers, which mix large quantities of transactions together to confuse authorities and derail any investigation. Think of it like it is a really good Scooby Doo episode.
Where it can get more difficult for hackers is when they want to convert the Bitcoins they have collected electronically into nationally recognized currency. Most companies that convert Bitcoin to dollars in the United States require that their customers provide identification. If a criminal registered with a company like that, it would be relatively easy for the police to track them down. Which means they would probably reinvest their money back into the internet network. It is in no way like laundering money, I swear.
But there are many Bitcoin exchanges outside the United States that do not require customers to register with a real-world identity. LocalBitcoins also makes it easy to find someone in any city around the world who will meet you in person and pay cash for Bitcoin without requiring any identification. The Bitcoin website describes this sort of transaction as a “Craigslist for Bitcoin” exchange system.” I describe it “creepy as hell” and “bring a gun with you just in case.”
The upside? It is getting easier to buy goods online using Bitcoin, you know, like hand-woven night caps for Granny or drugs.
What’s happening with the price of Bitcoin?
The price of Bitcoin has been rising, and recently hit a high above $2,000. Like gold, the price of Bitcoin has always been driven by the scarcity of the digital tokens. When Bitcoin was created in 2009, it was determined that only 21 million coins would ever be created.
Technology investors have purchased coins and pushed up the price, believing one day these tokens will replace the current World Bank’s paper and coin currency.
The corporate world has also taken interest in cryptocurrency, especially its decentralized financial network and the Blockchain, a global ledger where all Bitcoin transactions are recorded. Many banks are waging that real-world financial transactions will one day be run on networks similar to Bitcoin, which can operate more quickly, efficiently and securely than traditional financial networks.
There are now many competitors to Bitcoin, like Ethereum, and their value has also been pushed up by growing interest in the Bitcoin technology.
What are the currency’s origins?
Bitcoin was introduced in 2008 by a man named Satoshi Nakamoto, who only communicated by email and social messaging. While several people have been identified as Satoshi, no one has been confirmed. So, the search for Satoshi has continued. Again, another great premise for a Scooby Doo episode.
Satoshi created the original rules of the Bitcoin network and then released the software to the world in 2009. Whether it is he, she or they, Satoshi largely disappeared from view two years later. Anyone can download and use the software, and Satoshi now has no more control over the network than anyone else using the software.
Should I Invest in Bitcoin?
Sure, if you understood a damn thing I just wrote. Cuz I don’t.