For the uninitiated, Bitcoin is a software-based, open-source currency. Often referred to as a “cryptocurrency,” BTC is transferrable between web addresses without a need for any sort of information about owners of the addresses. All transactions take place within a few minutes, since they need only be registered in the public block chain to go through. The way in which transactions are confirmed in the public ledger allows for the creation of new bitcoins, with those who lend greater computing power to confirming the transactions standing a greater chance of winning in what is essentially an algorithmic lottery.
Those new to the concept may conflate some ideas at odds with each other about how BTC holds value. BTC’s algorithmic cap means that it is scarce and thus capable of bearing representational value. In many ways, BTC is a much more robust currency than USD. Fractional reserve banking can occur with BTC but (unlike the current method of creation of USD) is not a factor in the common storage or creation process of the currency. The process of creation (known as “mining”) is removed from any individual’s control by the algorithmic, open-network-based nature of the currency. Complete transactions are performed in a few minutes, unlike check deposits, credit card transactions and ACH/ SWIFT/ IBAN transfers in the mainstream banking system. Confirmation of transactions is public knowledge, and the transactions are irreversible. Efficient third-party solutions (e.g. circle.com, coinbase.com) exist for exchanging BTC for other currencies.
An increasing number of parties are turning to BTC as a viable method of efficiently exchanging value. I’ve used it in place of personal checks. Many individual businesses, like Pie Hole in downtown SLC, accept bitcoin. Apple Pay’s competitor, Google Wallet, appears to be looking into BTC integration.
BTC isn’t the only such alt currency. Other functional variants, such as Litecoin, have sprung up, copying BTC’s model. While potentially damaging to the network effect of worldwide adoption of a single such currency, BTC has the first mover advantage, making it the most likely alt currency to gain widespread acceptance.
BTC has taken heat for being the primary currency used in “deep-web” Tor marketplaces, such as Agora, Evolution, Hydra, Open Bazaar, the now-defunct Black Market Reloaded and Silk Road, where the equivalent of millions of dollars have been spent in black market exchanges. It should be noted that USD, Yen and every other currency on the planet have been similarly used for illegal and unethical purposes online and off; the black-market adoption facet actually represents an empowering aspect of BTC, mirrored in its growing above-ground presence. BTC is a truly globalized currency, lacking features of taxable transaction and having no affiliation with any government or business. Like the decentralized nature of information exchange in Bittorrent and the growing open-source software world, BTC is non-dependent on big business or government intervention to function, allowing individuals to be the greatest benefactors from their own use. How do you tax, ban or corruptly manipulate what is simply the public exchange of data?
BTC offers grassroots economies a chance of survival in a financial world dominated by businesses and governments who came to unfairly occupy their dominant original position. If widely adopted, BTC could truly revolutionize money in an unprecedented way.