First let’s go through a brief
explanation of what Bitcoin actually is. Bitcoin is a form of currency that
isn’t distributed by a federal government; rather it is created by super
computers using extremely complex algorithms.
All of these super computers form a network through which the Bitcoin
transactions are made. The system is set up so that it becomes more and more
difficult to create Bitcoins as time goes on in order to combat inflation. As
of March 24, 2014 Bitcoins traded at $588 USD but you can purchase fractions of
Bitcoins if you don’t want to put that much into it.
Now let us take a look at who uses
Bitcoin and why it’s beneficial. Since Bitcoins are not distributed through any
banks or governments you can make transactions without being taxed or charged
by a bank. This makes Bitcoin ideal for online merchants because it is cheaper
to accept them than it is to accept a credit card. It also makes it easier to
transfer money to friends and family because it is instant and doesn’t come
with fees like MoneyGram or Western Union. Another major use of Bitcoin is to
make illegal transactions. Major sites such as Silk Road have been used to
trade illegal drugs for years and other sites can support exchanging stolen
bank information, human trafficking, and the sale of illegal firearms.
Now you may be asking, Jeremy with
all these wonderful things happening with Bitcoin why hasn’t it already taken
the dollars place? There are a few reasons Bitcoin isn’t ready for mainstream
use yet. The first problem is that the systems can currently only handle 7
transactions per second which won’t cut it if Bitcoin was used worldwide. The
second issue is with its legitimacy. Users may be wary of Bitcoin because its
biggest market is the above mentioned Silk Road, which was believed to be shut
down in late 2013 but has since been reborn. In addition on of the biggest
Bitcoin exchanges, japan based Mt. Gox, was hacked and lost A HUNDRED MILLION
dollars’ worth of Bitcoin. So while
Bitcoin has some exciting benefits it has a long way to go before it can topple
the dollar.
Below is a video explaining the details surrounding the
“BitCoin Heist”
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