Few technologies have the ability to stir passionate online debate and baffle the vast majority of the population as do the crypto currency called bitcoin. This virtual currency has been a constant source of interest and confusion since it thrust itself into the mainstream in 2009. But interest in bitcoin is now greater than ever. Its value has soared to above $4,000, a new high point, turning some people who hoarded vast amounts early on into millionaires. But why? Is bitcoin the future of currency? Is it currency at all? What is it for? And should I buy some?
To start off with, what is a bitcoin and how does it work?
A Bitcoin is ONE unit of digital currency. Bitcoins are completely virtual coins designed to be ‘self-contained’ for their value, with no need for banks to move and store the money.
Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.
Again, it’s electronic Internet currency. Unlike dollars, euro, or Yen, that uses a single centralized bank to control it, bitcoins use a decentralized system whereby a network of computers, across the Internet, act as servers to process the financial transactions of this currency.
And so the process of how it works is it still works like real money whereby one person can pay another person for goods or services, however, once money is exchanged the record of the transaction is then publicly recorded on a digital ledger commonly known as a BLOCKCHAIN. Then, other Bitcoin users, commonly known as MINERS, verify the transactions found within this digital ledger or blockchain. Now, after a certain amount of transaction have been verified by a miner then that miner will receive a newly minted bitcoin for their work and thus, new bitcoins will be added into circulation.
While there are currently more than 12 million bitcoins in circulation, the total amount of bitcoins that can ever be created is capped at 21 million. This system, modeled after gold mining, makes finding new bitcoins more rare as the number of available bitcoins reaches the 21 million cap.
I keep hearing That Bitcoins Are Very Controversial. Why Would That Be?
Various reasons have converged to make Bitcoin currency a real media sensation.
From 2011-2013, criminal traders made bitcoins famous by buying them in batches of millions of dollars so they could move money outside of the eyes of law enforcement. Subsequently, the value of bitcoins skyrocketed.
That said, the value of a bitcoin is only worth what people are willing to pay for it. And that value has fluctuated over the years. In April of 2011 the value of one bitcoin was 75 cents and by December of 2013 that value reached as high as 1200 dollars. That trend has continued and at the moment, 1 bitcoin equals $5,758.04 Canadian dollars.
Ultimately, though, bitcoins are highly controversial because they take the power of making money away from the banks and gives it to the general public. Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs.
While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online doing illegal things.
Are there any places here in Canada that accept bitcoins?
There are many places now that accept bitcoin, most of them are online services though that is starting to change. All provinces in Canada, including Newfoundland and Labrador have a bitcoin compatible ATM machine where you can buy or withdraw your bitcoin money from.