Monday, 15 April 2013

What is Bitcoin, why is it doing so well and why should we care

What is Bitcoin, why is it doing so well and why should we care, Bitcoin is a form of virtual currency that draws a lot of attention with over $1 billion in activity. The venture is already successful, but has some growing pains. The world watches as Bitcoin values soar and drop with great volatility. Bitcoin uses "miners" who process so much data that they run up huge power bills. Bitcoin works on the bad streets of the Internet where anonymous buyers and sellers can exchange just about anything. Even though the system is decentralized, it is still vulnerable to hacking. According to an April 15 Forbes article, Bitpay supports more than 10,000 merchants, which represents a tenfold increase in the past six months.

Bitcoin firms do 15 million aggregate transactions a day. The transactions involve over 50,000 senders and receivers.

Bitcoin headed off some criticism by registering with the U.S. financial crimes enforcement network agency and adhering to the same anti-money laundering rules that mainstream banks follow. Bitcoin companies have also raised capital through leading venture capital firms, which further legitimizes endeavors in infrastructure, customer awareness and compliance.

Here comes Block chain. This is a transparency nightmare for traditional banks because Bitcoin makes the action publicly viewable (with the right tools) at a public transaction ledger. However, the transparency system conceals People's identity.

Bitcoin, or "Ripple currency exchange", works with Peer-to-Peer (P2P) social networks, making it a confusing system for most people. Merchant sales are a tricky, but growing prospect.

No bank or currency vendor sells Bitcoins. The virtual currency is purchased from online dealers like Tokyo based Mt. Gox. Bitcoins sit in a virtual wallet where owners can spend the currency or hold it until it gains or loses value.

Security is an issue. Hackers have found a way to cause trouble. Mt. Gox is one site that was hacked in 2011.

Virtual currencies require huge amounts of real world electrical power. Bitcoin operates with people called "miners". The data processing that goes into producing Bitcoins creates enormous electrical power loads. According to an April 12 Bloomberg article, some miners are paying more for power than they are earning with Bitcoins.

Volatility will be the life or death of Bitcoin. An April 11 Techland article described a Bitcoin market crash that raised concerns about the free-floating currency market.

Vendor availability is also an issue, but Bitcoin Wiki has the comprehensive directory of vendors and services.

In the end, Bitcoin is likely to survive as a very powerful “people’s” currency, but a rocky and uncertain road lies ahead.

No comments:

Post a Comment