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Thursday, December 12, 2013

An Introduction to Bitcoins

With the economy in shambles, a United States dollar isn't worth the toilet paper you wipe your ass with. So, what happens when a new currency shows up, especially when one of them is worth a little over $800 in USD? This new currency is called bitcoin. The questions are what a bitcoin is, what makes them different, how they are generated, and why the banks and governments essentially hate them. Open-source currency sounds a bit sketchy; however, one shouldn't judge a book by its cover. A bitcoin may have its disadvantages, but there are also many advantages. These advantages really don’t make it seem all that bad. If nothing else, the bitcoin may be a good thing.

First line of business is finding out exactly what a bitcoin is. A bitcoin is digital currency. It is an alternative to other world currencies like to dollar and euro. Another thing it is anonymous. It is not real money, but virtual token. A dollar has a serial number on it, but a bitcoin doesn't. One particular bitcoin has no attachment to one person. This new found currency is not regulated. Since there is no “owner” so to speak, there is no Federal Reserve or anything like it. A bitcoin can also be converted into real money. A bitcoin in 2011 was worth $7.50, however when I just checked one bitcoin was worth $878.70. However, like any other economic system it could crash and be worth nothing. Leaving what “virtual millionaires” there are with virtually nothing.

There are numbers of things that make the bitcoin different from any other currency. One of the biggest advantages is how quickly one can transfer money. If a friend needs to borrow some money, one would have to transfer money from their account at one bank to the friends account at another bank. Then the friend would have to proceed to withdraw the money. There is not a bank to have to wait on. Bitcoin is a P2P system, and it goes straight from one account to the other. Bitcoin is also made by the user. They are not backed up by anything, but they are generated. The process is called mining, which will get more in detail later on. With every good thing there is a bad thing though. Bitcoin is not widely accepted yet. This can put a damper on things, as if one cannot use it for their favorite products what is the point?

Since bitcoins are generated, or mined, how does it work? Most people who use bitcoins do not mine them. There are two reasons why one would want to mine bitcoins, if one can do it very well and gain a profit, or if it is done for fun and not intention of a profit. To mine bitcoins there is hardware required. When all of this first started all you needed to mine was a CPU. This is no longer a way to mine though. Even if mined for a long period of time, the earnings probably won’t even be one coin. If one were to use a high end graphics card to mine they might see some better results. Any GPU can be used; the AMD GPU’s are much more efficient. There is other hardware you can use to mine as well. However, some software is required as well. One can mine on their own or join a pool. It is more common to mine in a pool because it removes the luck needed. Before joining a pool, one needs a bitcoin wallet to keep earnings. The next thing needed is joining a pool. In a pool, the profits get divided up between members based on computing power contributed. Mining alone is also an option; however, the payouts are large but rare.

Not everyone shares a love for bitcoin either. The banks hate them. This is because they are simply threatened by them. In November there were reports of United States banks like Wells Fargo, J.P. Morgan Chase, Bank of America, and Citibank stating that they were closing the accounts or not accepting applications from those businesses that are associated with digital currency. Robobank have taken this to another level though. The bank cancelled 99% of transactions with bitcoin exchange. This is not a new thing that the bank has been doing either not just for individuals but for businesses as well. Why are bitcoins so hated by the banks though? Bitcoins show a real threat to financial systems. They are worried about something else taking over.

The government also is not a fan of bitcoin, but if the government hates it should be worth at least taking a good look at. The governments hate it because they do not have control of it. All they can do is possibly interfere with bitcoin. They could shut down the websites that deal with and in bitcoins. Even if they did try it the websites can be recreated and hidden relatively easy. Some governments could outlaw anyone from accepting bitcoins. This will not happen in the United States though unless our rights are completely infringed upon. As long as there a few host somewhere in the world bitcoin cannot but turned off. As we have all figured out, the government hates anything that it does not have control of. It only makes since for them to hate bitcoin.

Bitcoin may or may not be the currency that shuts down near to all of the financial institution. Regardless it is interesting in itself. After answering the prime questions of what a bitcoin is, why it is different, how they are created, and why the banks and governments hate them. This open source money, but it sounds awesome. If nothing else fun to mine!