Bitcoin

Not So Silky Road


Bitcoin is a digital currency developed in 2009. It is exchanged peer-to-peer and is not tied to a government, country or bank.

Bitcoin is a crypto-currency, meaning digital encryption is used to control security and the creation of new units.


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What Does It Look Like?

It is not like a dollar or Euro or any kind of paper money. It is a set of 26-35 alphanumeric characters beginning with the number 1 or 3.

Example: 3L78s1QyDZ86BRpStcfrlsfiKqsrTyXMPg

Who Created Bitcoin?

No one knows, although it is believed to be one or more anonymous hackers who went by the alias Satoshi Nakamoto.

Features

  • Can transfer funds from one person to another without paying a fee.
  • Anonymous- transactions are private and other person does not need to know who is sending the Bitcoin.
  • Anyone with an Internet connection can use it.
  • You don’t need a bank account or credit card to buy or send Bitcoin.
  • No limit on how much you can send or receive.
  • Can be used anywhere in the world.

Where Do You Store Bitcoin?

In a Bitcoin wallet, of course.

A Bitcoin “wallet” is a digital bank account that is mobile or web-based. These wallets allow you to buy, use and accept Bitcoin.

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All transactions in the Bitcoin network are kept in a public ledger called the Blockchain.

How Do You Acquire Bitcoin?

  1. Purchase it on an exchange. https://bitcoin.org/en/exchanges
  2. Receive it from someone else. People can transfer Bitcoin to one another: as digital currency, as payment for goods and services, as hardware, or as gift cards.
  3. “Mine” for it.Mining is running software on your computer that processes complex mathematical equations. You can earn Bitcoins by solving these equations.

Bitcoin Value

  • Bitcoin’s value is extremely volatile and fluctuates frequently.
  • There is a limited amount of Bitcoin that will ever be in existence. There will never be more than 21 million Bitcoin and 2/3 of all of the Bitcoin are already in existence today.
  • The Bitcoin mining process presently creates 25 Bitcoins every 10 minutes (the number created will be halved every four years), so that limit will not be reached until the year 2140.

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Bitcoin will do to banks, what e-mail did to the postal industry”

– Rick Falkvinge, entrepreneur and politician


Downsides

  • Unlike traditional bank accounts, Bitcoin wallets are not insured by the FDIC.
  • If you get hacked or lose your key (private access code) in a hard drive crash, you lose your Bitcoin for good.
  • It is still not widely accepted.
  • The price is very volatile.
  • Bitcoin payments are irreversible.
  • Because of its anonymity, it could potentially facilitate illegal activities.

Fun Facts:

  • The first Bitcoin ATM was installed in October 2013 in Vancouver, Canada.
  • Bitcoin is accepted as payment on hundreds of websites, including OkCupid, Expedia, WordPress, and Overstock.
  • You can use Bitcoin to pay for travel on Virgin Galactic to the moon, or for a Subway sandwich in Allentown, PA.
  • One unlucky man from London lost $7.5 million in Bitcoins when he threw away his computer hard drive. The device is now buried in a landfill near his home.
  • Cameron and Tyler Winklevoss, the twin Harvard graduates famous for their lawsuit against Mark Zuckerberg are betting big on Bitcoin. They claim to own 1% of all Bitcoin in existence.
  • Laszlo Hanyecz, a programmer paid 10,000 Bitcoins (roughly $25) for two Papa John’s pizzas on May 22, 2010. He did not know that it would be worth around $4 million today. Since then, May 22 is celebrated as Bitcoin Pizza Day to celebrate the most expensive pizzas in history.
  • Lamborghini was the first car company to accept Bitcoin in exchange for cars.

Resources

Great resource and video explanation for Bitcoin can be found here: http://www.investopedia.com/terms/b/bitcoin.asp

Interactive timeline showing the history of Bitcoin: http://historyofbitcoin.org

References

Bitcoinmining.com

Kelleher, Kevin “The gold rush days of bitcoin mining are over, and not because of the price” Web. 23 Dec. 2014

McMillan, Robert “Take a Tour of Robocoin, the World’s First Bitcoin ATM” Wired.com Web. 29 Oct. 2013

Brito, Jerry. Online Cash Bitcoin Could Challenge Governments, Banks. Web. Time.com 16 April 2011

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