I recently started to develop a fascination for what I am seeing as the “NEW WORLD CURRENCY.” Now, understand that I do not consider myself an expert on money and do not presume to know all things financial and I welcome all comments and counter thoughts on this subject.
And if this discussion seems too off topic you are welcome to skip it. However, the use of Bitcoins is starting to appear in more and more transactions including real estate, so it behooves everyone to understand what cryptocurrency (i.e. Bitcoins) is and what it represents.
I think what unnerves people is that Bitcoins are digital. It is hard to wrap your mind and your hand around something that exists in the air and has no tactile feel. (BUT does that make it any less real such as oxygen which you can't touch, see, or feel?) At least with a piece of paper that has a US$1 or US$100 dollar symbol on it you can fold it and put it into your wallet. But why is the one dollar bill worth a dollar and the one-hundred dollar bill worth one-hundred dollars? Because “we” as a country, government, banking system, world, etc. say it is. So why can’t we as a country, government, universe say that a certain string of code is worth a certain amount of “money”? In my opinion, we can.
Ultimately, the question comes down to control. Governments don’t like cryptocurrency because it is harder to track, to measure, to control, and finally to tax. If the “currency” is not flowing through the traditional banking system, then there are more avenues for money laundering, counterfeiting, value manipulation, and tax evasion.
To understand Bitcoins you basically have to understand the definition of money. Dictionary.com provides the following definition of money:
[muhn-ee] Show IPA noun, plural mon·eys,mon·ies, adjective
1. any circulating medium of exchange, including coins, paper money, and demand deposits.
2. paper money.
3. gold, silver, or other metal in pieces of convenient form stamped by public authority and issued as a medium of exchange and measure of value.
4. any article or substance used as a medium of exchange, measure of
wealth, or means of payment, as checks on demand deposit or cowrie.
5. particular form or denomination of currency.
Some governments have decided that Bitcoins and other cryptocurrency does not meet the requirements or definition of “currency” or “money” and therefore have outlawed or blocked their central banks from accepting Bitcoin in payment, China being one such country. However, I think this will only increase the use of cryptocurrency rather than decrease it. People will see it as a way to avoid the traditional banking system and circumvent government control.
Wikipedia (Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization) provides useful information on Bitcoin creators, structure, faults and advantages. (While I have not always found Wikipedia to be a perfect resource, I have found it to be a good starting point to find additional resources regarding varied subjects.) Their first couple of sentences help to define Bitcoin:
“Bitcoin is an open source, peer-to-peer payment network and digital currency introduced in 2009 by pseudonymous developer "Satoshi Nakamoto". Bitcoin has been called a cryptocurrency because it uses public-key cryptography for security.”
NOTE: Bitcoin is not the only cryptocurrency, but it is one of the oldest in existence, the others being created since 2009. (i.e. Litecoin, Peercoin, Namecoin, source Wikipedia)
In a December 16, 2013 Bloomberg interview Matt Miller reported about his experiences using Bitcoins to make purchases, and reports an IRA that accepts Bitcoin in trust.(Dec. 16 In this interview he is speaking on Bloomberg Television's "In The Loop." Source: Bloomberg)
As more and more controversy has developed over the use and acceptance of cryptocurrency, at least one organization has formed to try to bring Bitcoin users, advocators, and distractors together to discuss and review this relatively new product through The Bitcoin Foundation. They provide a blog with timely discussion on this new phenomenon.
This subject bears more scrutiny and I hope people will investigate and respond with their thoughts.