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The Rise of Digital Money — What is Bitcoin?

Money is a scarce item that people receive in exchange for goods they desire.  The creators of Bitcoin believe they have created a digital scarce item, that can be used for exactly the same purpose!

What is Bitcoin?

Bitcoin is an anonymous (so they say), decentralized digital currency.  It is the first peer to peer currency system.  This means that coin owners, can transfer currency from one person to the other, over the internet to any country in the world.  There are no fees, and no contracts to worry about. The supporters of Bitcoin, argue that you can transfer wealth, without requiring permission from a Government or institution.  It is a form of internet currency that is not controlled by Government, and it is believed that this freedom is reducing the power of government.  Detractors, say it is a valueless bubble, that was created out of thin air, and is not backed by any real asset.   As a result, it is believed that the value of bitcoins can one day go to 0.

Whatever side you are on, what is obvious is that bitcoin is here to stay.  Bitcoin has been in existence since 2009, but has seem some wild swings in volatility over the last few months.   As of April 2013, the total dollar value of bitcoins was value at $1Billion dollars! Amazing for something created out of thin air

So who creates the currency?

In the real world you have gold, to obtain Gold you need to mine the earth for gold.  The concept has been applied to Bitcoin.  Bitcoin is created on the internet by anybody running the “bitcoin miner application”  This application is opensource and free.  The code is designed to produce (“mine”) coins at a predictable rate.  So early adopters will be able to mine for more bitcoins than late users, (much like gold) because as time passes, there will be fewer Bitcoins buried in the internet crust to mine.   The total sum of bitcoins in the internet ecosystem was predetermined in the source code to be 21 million.  So once 21 million Bitcoins have been created, you will only be able to trade the coins in existence.  When you make a payment transfer of bitcoins on the system, it is these miner applications that verify payments made across the network, so you can see there is no need for a real person to regulate anything.  It is all automated…………The matrix 🙂

 

How do you get Bitcoins

There are different ways to obtain Bitcoins, you can obtain by selling a product and getting paid in Bitcoins,  or by buying bitcoins directly.

 

We are not economists at Smile and Mobile, and do not have an opinion on whether this is a good investment or just a fad, but if you have your money floating out their in internet land…watch out for hackers!!  To learn more, visit bitcoin.org.


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