- February 2014
- Posted By JohnnyG
- 0 Comments
You have probably heard at least once about bitcoins, even if you have no idea what they are and whether they can actually be used. This digital form of currency has started changing the manner in which traditional fiscal systems work and many predict that it will become even more prominent in the future.
So, how does the bitcoin economy work? Can digital currency come with stability and actual purchasing power or is it yet another short-lived phenomenon?
What is Bitcoin and How does It Work?
As already mentioned, the bitcoin is a digital currency form that can be generated and used across the globe. It is a decentralized fiscal instrument, a characteristic that makes the bitcoin quite different from traditional money. National banks are not involved in the process of issuing bitcoins, which is the most revolutionary aspect connected to the currency.
The beginning of bitcoins was given in 2009 when Satoshi Nakamoto – an individual or a group of hackers using the pseudonym – created the model. Bitcoins started becoming very popular in 2010 and they reached the highest value during 2013 – exceeding 1210 dollars for one bitcoin.
Bitcoins use a peer-to-peer technology for currency issuing. The money is issued through a process known as mining – computer hardware and software is used to complete complex calculations that are used for transaction verifications. This process limits the number of bitcoins being issued with the current amount having a value of approximately two billion dollars.
Federal Government’s Reaction to Bitcoin
The bitcoin has become so prominent that many governments and central banks have issued statements concerning its existence and the possible regulation of the currency.
The Federal Government already asked for the creation of a policy that will regulate digital currencies like the bitcoin. Bitcoins are created, purchased and exchanged online every single day, which resulted in the Federal Government’s reaction to bitcoin.
Governments are mainly worried about the decentralization and the possibility of bitcoins being used for malicious purposes. According to security officials, the nature of digital currencies can turn those into a great tool for terrorist organizations and criminals who want to stay outside the traditional fiscal system.
Interesting Facts about the Bitcoin
It is yet to be seen how the bitcoin will evolve and continue gaining positions. The model is already proving to work smoothly and deliver great benefits for individuals involved in the mining process.
There are companies already offering their employees to receive bitcoin payments – yet another development demonstrating how prominent the digital currency has become. A number of stores and service providers will accept bitcoin payments, as well.
Provably bitcoins is another quite interesting development. This bitcoin game theory is already used by various online casinos. Provably bitcoins is a series of cryptographic algorithms, enabling gambling website users to see how outcomes are created. This verification mechanism increases accountability and takes the game to a whole new level.
Since the currency is already an important fiscal factor, the first bitcoin theft cases are already a fact. In June 2011, a person lost 25,000 bitcoins from a digital wallet. This number is the equivalent of approximately 375,000 dollars. User names and passwords have been leaked by online currency exchange websites, confirming the fact that bitcoin theft could really take place.
Many experts believe that the bitcoin is here to stay. Some say that the bitcoin is the currency of the future but right now, bitcoin is 100 percent unregulated. This fact may be a cause of concern for some but the digital currency has purchasing power and its prominence is growing. Chances are that it will revolutionize the traditional fiscal system, once the mechanism gets some form of basic regulation.