Bitcoin is a digital currency that was released in January of 2009. A man identified by the pseodonym Satoshi Nakamoto developed this system, but did not provide any personal details. He reduced his involvement with Bitcoin in 2010, and the last known communication from him was in 2011. It is unknown why he keeps his identity and association with Bitcoin a secret. Although it has been seven years since Bitcoin's development, 65% of Americans do not know what it is and 80% have never used it. Bitcoin is similar to financial networks such as PayPal and credit companies. However, a major difference is that Bitcoin is decentralized. Companies such as PayPal operate to earn a profit; they work to benefit their shareholders. Bitcoin is not directly operated by a company, which makes it the world's first completely open financial system. Bitcoin transactions are processed by hundreds of computers all over the world. Another thing that makes Bitcoin different from systems such as PayPal is the currency that it uses. PayPal completes transactions using the American dollar; however, Bitcoin is its own currency.
The Bitcoin is becoming more and more valuable as time progresses. In January of 2011, one Bitcoin was worth $0.30. By the end of 2013, one Bitcoin was worth $600. There are around 12 million Bitcoins in circulation which means that Bitcoin's money supply has exceeded seven billion dollars. Around 3,600 Bitcoins are added into circulation or "mined" every day. The maximum number of bitcoins that will ever exist is 21 million. Bitcoin supporters believe that its decentralized structure could prevent inflation. Many companies and restaurants have started to use Bitcoin to complete their transactions. Since Bitcoin is an international system, it has the potential to provide more quick and efficient transactions overseas in the future. However, since Bitcoin has few government regulations, it has been used for illicit purposes such as gambling and drug dealing.
There are many benefits that would occur if Bitcoin became a common currency. Since, it is a digital currency, it is more difficult to replicate, so the circulation of fake money is likely to decrease with the use of this system. Bitcoin will allow users to have a lot more freedom in financial transactions than traditional banks do. Users will not have to reschedule for bank holidays, and they will have more control over their transactions since there is to central authority involved. Bitcoin also allows for more anonymity since transactions can be finalized without providing personal information. This will likely decrease cases of identity theft. All financial transactions are available for everyone to see, but personal information is not linked to this because only the user's public address is shown. This provides for a unique system that is transparent yet anonymous at the same time. Another advantage is that Bitcoin transactions have no or very low fees. The fees are lower than that of credit cards and PayPal.
Although many positive things could come from the widespread use of Bitcoin, it is still a developing technology, so naturally, it still has its flaws. Most people are uninformed about Bitcoin, which means that it is not used by the majority of people. In order for this currency to become more widespread, it is essential to raise awareness. A negative impact of the anonymity of the system is that it allows people to buy and sell illegal items with less fear of being caught by authorities. Another disadvantage is that it is easy to lose. If your Bitcoin wallet is hacked and you lose your coins, it is almost impossible to get them back.
Although it is possible that Bitcoin will become a common currency in the future, there are many things to beware of right now. The new technology still has many disadvantages that will probably be worked out as time progresses. Due to this, it is probably not wise to invest large amounts of money in Bitcoin at this point, but maybe in the future, it will be the most used currency!
