Apr 21, 2014

Bitcoin: The Emperor's New Clothes?

For whatever reason, I've been seeing a great deal of news recently about Bitcoin, or digital currently.  Confused about Bitcoin?  Yeah, me too, so I decided to conduct a little investigation.  Below are some of the interesting resources and facts I found providing (for the most part) easy to understand details of this digital currency.  I'm still leery of the idea and the concept ... mostly because I don't completely understand how this will be a secure way of transacting business ... but I am nonetheless very interested in where it's heading.  If you'd like to learn more, check out the information below, and feel free to share if you find it useful.


For starters, if you want to know about Bitcoin, go directly to the source (Bitcoin.org):



From what I've gathered, one of the most important concepts behind digital currency is that it removes the issue of "trust", essentially creating an open-source ledger that allows anyone and everyone transacting in the currency to clearly and instantly create a record of the transaction, exchanging, if you will, digital title to the money.  It does all of this by eliminating the need for a "middleman" or broker, in most cases, a bank.

Interestingly:
  • 3% of global GDP is derived from fraudulent credit card/banking transactions
  • When transferring money, an individual can spend as much as 10% of the money being transferred on costs and fees (credit card fees run in the 3-4% range per transaction)
The cost savings alone would be monumental.

Freakonomics further explains in their podcast below entitled, "Why Everyone Who Doesn't Hate Bitcoin Loves It", how Bitcoin eliminates the issue of the "Bezantine General's Problem".



This article, entitled "Explain Bitcoin like I'm Five", does a great job of drawing the analogy between exchanging Bitcoins online and exchanging a red apple with a friend at the part.  It's useful, even if still a little difficult to digest (pun intended).

A couple of other interesting facts about Bitcoin:

  • Only 21M Bitcoins will ever be made
  • Coins can be created virtually online, by anyone, through a free software that allows individuals to "mine" new coins.
  • Of course, mining Bitcoins is very difficult, applying complicated mathematical computations to create just one.  In fact, it has been estimated that the energy consumed to create Bitcoins is the equivalent of the amount used to power 3M homes. 

And, if you like Mashable (who doesn't?), then check out this short video explanation.



A longer video for those with a little more attention span can be found here.




Feedback about Bitcoin?  Please share in the comments.