Are Bitcoins the New Universal Digital Money?
With all the hype around Bitcoins, it is difficult to decipher if they will become the mainstream world digital currency. Although many online merchants are now accepting Bitcoins , such as Overstock.com , Zynga and others, there are many questions surrounding their legitimacy and security. Bitcoins, which were noted as one of the hottest investments of 2013 according to Forbes magazine, are also a hot topic of controversy among e-retailers and bankers alike. Social Media has helped Bitcoins become a global phenomenon of Digital currency around the world, and in a position to challenge traditional money exchange and e-commerce.
In my first installment here of coverage of Bitcoins, let’s first explore them and how digital money is changing the way we do business. Bitcoins, for those of you who are unfamiliar, are digital coins that are sent through the Internet, according to the site www.weusecoins.com, who insist that the process of exchanging bitcoins is a secure one. This “Digital Money” can be sent directly person-to-person without a bank, in any country and they cannot be frozen like regular currency.
Because Bitcoins are the first decentralized currency, there are many concerns among both buyers and sellers alike surrounding real cash conversion, value, inflation and possible coin theft. Think of the dollar. If the United States simply printed money whenever they felt necessary without any review of the state of the economy, we would be in even more of a mess (I will refrain from any political banter here). With Bitcoins, anyone can produce them.
Anyone can produce bitcoins, but it takes a tremendous amount of computer power to “mine” them according to the Daily Finance article. A miner can purchase external software with USB keys with the bitcoin logo to mine them and connect to “mining consortium” which combines a network of coins to store them.
Bitcoins (much like the first gold mining days) are mined slowly relative to the total finite supply. A recent New York Times article reported that there is a limit of twenty-one million new coins built into the software, and the last one is projected to be mined in 2140.
Once a bitcoin is generated through a bitcoin miner, the amount is adjusted by the network and stored in the users digital wallet. To send bitcoins, the transaction is confirmed by the miner and is stored permanently and anonymously in the network. The transaction is then recorded as an Open Source and can be viewed by anyone. The transaction is completely free to both the sender and the receiver.
Some of the most recent acceptors of bitcoins are namely Overstock and Zynga which a recent CNBC article says is just the beginning for bitcoins and eCommerce sites. While the popularity of bitcoins continues to grow, there is a lot of skepticism over the anonymity and irreversibility of them. The illegal purchasing of drugs online in the Silk Road scandal last year has sparked some of this criticism as to what bitcoins will be used for.
When the feds busted Silk Road founder, Ross Ulbricht, they seized $33.6 million in bitcoins. Concerns have since been raised on how bitcoins can be traced, and if it poses more security dangers than cash. Right now, the bitcoins are issued to the miners who buy things or sell them to non-miners. “Every bitcoin is verified and registered on all of its networks with a timestamp to prevent double spending”, according the New York Times.
As of now, bitcoins can buy you almost anything. Video games, computer servers, gifts and now furniture can all be purchased with bitcoins. As bitcoins have started to gain more trust from its users and more hype from social media the stock price of bitcoins has reached over $1000.
Social media has been a huge player in the rising stock price of Bitcoins. A recent study shows that the price of bitcoin is directly influenced by the use of social media. In other words, “the more social media activity rises so does the value of bitcoins”, according to a recent Examiner article.
Bitcoins have further evolved with BitWall which is a social paywall which accepts both Tweets and Bitcoins. The Chicago Sun-Times will be testing BitWall for 24 hours on February 1st, 2014, according to a recent article. Combining social media and bitcoins can make payments more seamless, but it can also complicate payments and may create security issues — depending on who you ask.
The bitcoin is still being figured out by economists, eCommerce sites, small business and all the skeptics, but one thing is for sure; it is not a fad. As it is confirmed that social media and bitcoins are directly linked and major companies are starting test phases with bitcoins, we can only assume that this is just the beginning.
But will the potential global adoption and use of Bitcoins means for protecting your online identity and enabling devaluation of products and services? And what about hacking into mining systems to steal Bitcoins? All of these are valid concerns surrounding this new “Digital Money.” I will be watching and writing about the use and possible abuse as it relates to Bitcoins, Social Media and Cybertheft as this movement continues to develop.
What are your thoughts on this type of currency? Is the Bitcoin the new global currency exchange? Is Digital Money like Bitcoins poised to take over real money? Weigh in with your thoughts by commenting here. To stay up to date with Bitcoins, social media and Digital Money, make sure to subscribe to my Blog.