What if tomorrow your dentist began to accept bitcoins? In recent months, the popularity of electronic money has been growing. Its price is exploding in the markets, more and more online shops are accepting it and the stories of computer enthusiasts who became virtually millionaires thanks to their Bitcoin investments. We gathered interesting information about this new phenomenon on the markets:
1. A virtual money that does not rely on a bank
It’s a bit like cash on the internet. It is exchanged from person to person, without going through a bank contrary to what happens when you pay with your credit card.
Unlike the euro or the dollar, there is no central bank attached to a state to issue bitcoins or control their circulation. The money is actually created and managed by the “miners”.
When one of these “miners” manages to validate a large number of transactions, he is rewarded by pocketing 25 bitcoins. 21 million bitcoins must be put into circulation, and not more. So far, just over 12 million bitcoins have been issued.
2. Bitcoin ensures anonymity
An almost total anonymity in transactions is ensured. Unlike with cash, you do not need to know the identity of your interlocutor to pay or be paid. The counterpart of this anonymity is the transparency of the exchanges: any internet user can get access to any detail. A website even refers in real time the transactions that take place on the Bitcoin network.
For their part, the “miners” retrace the journey of each bitcoin since its creation. In order to avoid fraud, they check in particular that the bitcoins issued have not been spent twice. The most valuable advantage of Bitcoin is that they no longer rely on banks to carry out transactions.
Unlike a conventional online purchase, when a payment is done in bitcoins, no intermediary takes a commission on the amount disbursed. The purchaser, if he wishes, can pay a fraction of a penny to “miners” to thank them for operating the network and see his transaction validated faster, but nothing compels him to do so.
3. It is unpredictable
Bitcoin is volatile, so investing all your euros into bitcoins would not be the greatest idea. In early 2013, a bitcoin was exchanged for 13 dollars (9.50 euros). A little more than a year later during the switchback of the markets, it was worth about 722 dollars (530 euros). And it is impossible to know how much will it come out at in a few weeks. It is far from the tranquility of a savings account.
4. No regulation
Bitcoin’s course is not regulated at all: the price of the bitcoin depends only on supply and demand, and there is a limited quantity. In recent months, the characteristics of this currency have made it more and more popular, and its price has risen accordingly.
The problem is that soaring prices have encouraged Bitcoiners to save rather than spend their money. This tendency of speculation does not place the currency in an ideal situation.
5. Some geeks made a lot of money from bitcoins
The stories of successful geeks often make the media happy. While studying computer encryption systems, a young Norwegian named Kristoffer Koch (read his story on News.com) acquired the trifle of 5,000 bitcoins for the equivalent of 18 euros in 2009. Four years later, the fifth of his savings allowed him to buy an apartment in Oslo, reports Le Figaro. However, the story of James Howells is less happy.
After a major clean-up of his office in the summer of 2013, this 28-year-old British engineer threw away the hard drive of his old computer, which became unusable. It contained the password that allowed him to use the 7,500 bitcoins he had accumulated at the beginning of 2009. He lost everything
6. Bitcoins may be stolen by pirates
The target of the pirates is the purse, a computer file that contains two elements: the owner’s bitcoins and a security key. It is this latter element -represented by a complex sequence of numbers and letters- which allows the sending of funds. If this purse is installed on an unprotected computer, a hacker can steal a copy of it.
It is also possible to entrust the wallet to a specialized website, which then manages the security key. This makes it possible to use its bitcoins on any device connected to the internet, but implies to give a blind trust to the site in question: if it is hacked, you can bid farewell to your bitcoins. Paradoxically, the surest way to keep this virtual currency is to create a “paper purse”.
You must then generate the security key on a computer that is disconnected from the Internet, print it on a good old piece of paper, remove it from the hard drive, and then place the precious sheet in a safe place.
7. The banks do not really like it
The banks blame several things on the bitcoin: not being regulated, not backing up to real activity, and not having a safety net to enable small savers to regain their investment in the case of collapse. Moreover, the fact that it could be exchanged anonymously would encourage criminal activities, money laundering, and terrorist financing.
8. Some say it is only a „counterfeit currency”
For some, this virtual currency is only at the beginning of its success. Its operation would have already corrupted the banks, and the next few months should see the continuance of bitcoin’s high flight. For others, it is only a “counterfeit currency” that will collapse sooner or later and whose victims will be those who acted too late.
There remains the question of the computer security of the protocol used by the bitcoin to secure the transactions. Is it absolutely surely protected from the attacks of pirates? We must be sure that we use a protected computer or we should entrust our wallet to a specialized website as mentioned above.
Interested in Bitcoin mining? Then don’t forget to read our other articles on the topic as well: