Bitcoin – Crypto Currency to rule them all

Current Bitcoin Rate in US dollars:

Where the old currency dies out and the new currency starts living
Where the old currency dies out and the new currency starts living

It all started August 18, 2008, when a person or a group, known only as “Satoshi Nakamoto” registered a new domain known as Bitcoin.org.

From there, he released an initial design paper for the new cryptographic Bitcoin currency on October 21st, registered the Bitcoin client project on Sourceforge on November 9, and mined the genesis block on January 3rd.

Bitcoin: A decentralized digital currency that enables low-cost payments without the need for central authorities and issuers. Bitcoin is a peer-to-peer (P2P) currency system created in open source C++ programming code. Bitcoins can be accessed from anywhere in the world with an internet connection. Once a user has Bitcoins, they are stored in a digital wallet. Bitcoins can then be sent to anyone else who has a Bitcoin address. Bitcoin was developed in 2009 and based on the works of an individual or group of individuals known as Satoshi Nakamoto.

The person or people who started this revolutionary coin were only active till 2011, when they stopped communication on the Bitcoin forum and left all to his associate in developing the Bitcoin standard, Gavin Andresen.

Their motives are believed to be political, in-line with groups such as Anonymous and Wiki-leaks. As the coin bypasses government and banks control mechanisms and is used to transfer money directly from point A to point B, it is virtually impossible to collect tax on it, nor identify the involved parties in each transaction which are only identifiable by their Bitcoin address.

As banks (and governments) see this as a disturbing (though for the time being small) threat to their authority, they have been monitoring it closely for the past 2-3 years. On April 2012, a report regarding Bitcoin was done by FBI and shown concern regarding the possible criminal and illegal uses of Bitcoin in the present and the future. The banks didn’t stay far behind, and in October 2012, the European Central Bank released a 49 pages long report titled “Virtual Currency Schemes” which describes Bitcoin and similar crypto currency and the threat they pose to traditional monetary systems (AKA banks and government taxation systems).

They suggest fighting the threat by imposing limits on the virtual currency systems – realistically trying to take back the control.

It is always interesting to see any idea that makes banks and large corporations or governments scared for their financial interests.

What’s more interesting to me is seeing where this will lead to. Following the initial success of Bitcoin, several crypto currencies were born, and to name a few: Namecoin, LitecoinSolidcoin, IXcoin and a few others. None of them gained the same or even a close valuation to that of Bitcoin. They all are variations on the same idea, but in a world where crypto currency is still brand new (when comparing to hard coin or notes), the grandaddy of those coins is still Bitcoin.

Here you can set-up an on-line wallet:

Open a new Bitcoin Wallet here

 

And here you can download the Bitcoin Client itself (also includes a wallet):

Bitcoins are received and sent here

When it comes to getting Bitcoins, there are two main ways: mining for them (by yourself, which is called Solo and requires more computing power generally but also rewards better, or within a pool of miners which requires less computing power but gives fractions of bitcoin each time), or buying them, which offers many ways – from contacting a private seller and meeting face-to-face with cash, and await the currency transfer, to using crypto-currency exchange websites which requires identity verification and usage of bank transfers or other similar means.

Paypal for instance, does not like bitcoin merchants and tends to ban sellers or buyers if it finds that they are using the service for that purpose. The reason (that they present it) is:

Prohibited Activities
You may not use the PayPal service for activities that:
3. h) involve currency exchanges or check cashing businesses,

Or in short, they don’t care for currency exchange activity – which makes sense as it would expose them to money laundering related law suits.

But I can say from my experience, there are plenty of ways, most of them online and/or localized  to buy small (usually up to 1000 coins) amounts of coins with a small fee – still it usually involves either bank transfers (local ones are usually cheap or free of charge) or various money transfer services. You do need to put a bit of faith in people as you pay first and pray later that the coins will arrive at your account (which you’ll be able to see practically immediately).

All transactions in bitcoins are final. That is also why you have to pay first and have your payment verified before you can get the coins, because once the coins fly over the world wide web, the deed is done and there’s no going back. The deals are represented simply by addresses – no names, no identifying markers or details other than addresses.

Before I finish this article, I want to clear something up: Bitcoin, as a protocol or a currency has never been hacked. There were a few incidents in which stock exchanges were hacked into and people’s accounts which contained coins were emptied out, and one or two cases where the owner of such site ran off with people’s coins, but these are all human related issues which can and do happen with physical world finances just the same. The protocol of Bitcoin itself, or the wallets have never been hacked nor cracked.

I have been exploring this coin for a couple of years on and off, and my only regret is that I didn’t buy some sooner. One of the people who bought 371000 coins when it was dirt cheap found out a year or two later that he was sitting on over a million dollars worth of coins. It’s unclear what he did with the coins though as since he had some financial trouble related to  the american presidential campaign.

Time will tell where Bitcoin is headed, but if the current financial disasters taught us anything is that banks and government controlled currencies are only as trustworthy as the people in those establishments, and trusting politicians or bankers these days proves to be a grave mistake.

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