Much has been made about the rise in popularity of the digital cryptocurrency Bitcoin recently. Most recently, a group of scientists in Russia was caught using a government-owned supercomputer to mine the coins. But this sort of story is far from uncommon, albeit seldom on this kind of scale. It seems that a reasonably sized chunk of the population with sufficient time to devote to the mining process of Bitcoin are racing to enhance the processing power of their home computers. But one thing that has become somewhat apparent watching this whole thing unravel is the fact that most people, both those mining and those just reading about it, have a somewhat hazy understanding of what Bitcoins are and how they are used.
Most people familiar with the concept of Bitcoin understand that it is a cryptocurrency acquired by having a computer solve complex math equations as quickly as possible. The process of solving these equations is referred to as “mining” and more advanced computers are able to work through equations faster, and therefore solve more equations in a given period of time, and by extension make more money. But this is overlooking a somewhat glaring problem: in what way are Bitcoins money?
Unlike circulated currencies, cryptocurrencies do not have any sort of central distributor that manages its scarcity and therefore value, in a way in which we are familiar. Yes, there are only certain places in which Bitcoins can be acquired. But there is no governing body or nation or entity for that matter, that actually regulates or controls the distribution. Instead, the scarcity and distribution are determined by the complex equations that have to be solved. Essentially, it is a truly free market where anyone can make as much or as little as they put in the work to attain and there is absolutely no intervention from anyone.
But the lack of intervention has something of a drawback. Bitcoins and other cryptocurrencies like it are not particularly new, bitcoin itself first beginning its distribution in 2008 and being derived from other cryptocurrencies that came before it. In many cases, people are either attracted to the prospect of mining Bitcoins as a sort of novelty or way to make a bit of money on the side, or they have interest in what they can buy and do with an all but untraceable currency. It is worth mentioning that Bitcoin has long been the preferred currency of the deep web due to the fact that it can be exchanged across international borders without any trouble and doesn’t require any sort of laundering or have to be claimed as income. All manner of nefarious deeds is easier to fund and harder to be caught doing thanks to the use of cryptocurrencies.
This is not to say that the use of Bitcoins is inherently suspicious. Most people just like that they don’t have to write it off on their taxes. It is, however, important to understand that the opportunity to use a currency like bitcoin in such a way exists and that as more people across the board use bitcoin, something that has been happening steadily for the past decade, more people will be using it in such a way. But as Bitcoin’s popularity grows, so do perfectly reasonable outlets for its use.
These can take the form of gaming websites accepting them as payment for in-game items, to some businesses recognizing it as a form of online payment. These are, as of now, troubled by low transaction speeds as well as other problems, but it will likely be that as the popularity of Bitcoin grows and this method of payment becomes more necessary that businesses will figure out how to accommodate it.
Bitcoin is something that can hypothetically be used as money, but the best places to do it are commonly on the wrong side of the law. So for the vast majority of people, such as the Russian scientists who lost their jobs this week of this, mining Bitcoins is simply building up funds for a feature in which they will be able to spend the
