According to the Investopedia definition, a cryptocurrency is “a digital or virtual currency that uses cryptography for security”. While there are number of these in circulation now including Litecoin, Namecoin and PPcoin the original, and undoubtedly best known, is Bitcoin. As you might expect from its digital nature, this was the brainchild of a computer programmer named Satoshi Nakamoto and was first introduced in 2008.
Comparatively soon after its introduction, Bitcoin started gaining popularity as a way of making transactions which did not need any intervention from banks or credit card companies and which also offered a high degree of anonymity. This was a massive boost for the online poker circuit. Whereby the safety of needing both parties to approve the transaction meant game private game pay-outs were settled fairly. With the anonymity also allowing players to play in worldwide tournaments without having the worries of international transfer fees.
Unfortunately this also attracted interest from people who wanted to remain anonymous for not entirely legal reasons through a website called Silk Road which was closed down by the FBI in 2013.
Since then the Bitcoin has achieved greater mainstream status. Originally reserved solely for online payments and transactions, particularly on games purchases and online gambling websites. Now more and more businesses bricks and mortar businesses from flower shops to cafes are starting to accept it as an alternative form of payment – with many welcoming the savings that it can represent thanks to the minimal or non-existent fee structures.
One potentially confusing area for users of the currency is its “exchange rate” with more conventional currencies. Over its relatively short lifespan this has fluctuated greatly ranging from as much as $1,250 per Bitcoin to as little as $200 as recently as March 2015. Of course, like all currencies this only really important when you want to convert your Bitcoins for dollars, pounds, or euros. If you’re happy to stay within the Bitcoin world it’s always going to be far less of an issue.
Opinions are divided, however, as to how soon and even whether Bitcoins will truly become part of the mainstream and there are certainly hurdles to overcome before they are. For example the ledger system called the Block Chain that records all transactions is fine at the moment when relatively few transactions are being made but improvements will need to be introduced to cope with greater volumes of traffic.
In terms of the projected value of Bitcoins there’s certainly good reason for optimism. That’s because only a finite number are planned to be released so they are likely to become more and more valuable as time goes on.
The safety and fraud protection elements of the Bitcoin have always been some of its strongest features but more widespread use is sure to attract the attention of increasingly sophisticated cyber criminals constantly on the lookout for new online areas to exploit. Governments and other financial regulators may well also start to show more of an interest if Bitcoins move on to the next level.
So, with a world in flux in so many ways, the Bitcoin could prove to be the economic phenomenon of the 21st century – but we’ll just have to wait and see.
Image credit: CC by fdecomite