Do you guys not know about
Bitcoin?
It's a crypto-currency started in 2009 by a mysterious figure called 'Satoshi Nakamoto.' To this day no one knows his true identity. He released a white-paper describing bitcoin in full, in all its cutting-edge mathematical glory.
By saying it's 'crypto' I mean each coin is cryptographically unique, and it is this cryptography which prevents them from being copied
ad infinitum like other digital items.
Because they're unique and unduplicateable, they are scarce, and that means they can be used to facilitate trade--as money.
In fact, bitcoin is currently the cheapest and quickest way to send money overseas. You can send thousands of dollars, or more, for the costs of a few pennies. Entire businesses have sprung up to make it easy.
But perhaps the best thing about bitcoin is that, unlike gold, it is a digital native. You cannot email gold, so you're stuck with cash. Cash can be transferred digitally, but a cash handoff between institutions later follows. Bitcoin circumvents that need entirely.
Bitcoin relies on a distributed network of computers called 'miners.' What miners do is process the bitcoin transactions generated by people who have bitcoin.
Let's say you wanted to buy some bitcoin. You'd search out a reputable place to do so, something like Coinbase, Mt. Gox, or BitInstant.
First you'd need to have a place for them to send your bitcoin too. This is done by generating a wallet. A bitcoin wallet is a simple file called wallet.dat that contains a randomly generated address that anyone can send bitcoin to. But to get money out of the wallet they'd need the private keys, which exist only in your wallet, and that's why wallets are encrypted for security. Some people use a high-tech site like Blockchain.info which uses client-side javascript to create and encrypt wallets so they never have access to your funds.
With wallet in hand you'd send money, using various means, to a person with bitcoin (using Coinbase or other 3rd partner agents), whom would then send the bitcoin into your wallet.
This is done by broadcasting the transaction to all the miners in the bitcoin network. They add this transaction to the blockchain--a file that's maintained by the entire network as a record of valid transactions. Once enough miner-nodes have verified the transaction mathematically, it is irreversible and the coins are sent. Takes less than 15 minutes on average.
The miners are called miners because they are literally mining new coins. The mathematic procedure to verify transactions forces them to solve a difficult problem such that only a few nodes will be able to solve this problem, randomly, every 10 minutes. The ones lucky enough to do so are awarded new bitcoins by the protocol. It's done in such a way that this cannot be faked.
The new coins are verified cryptographically just like a new transaction and the blockchain continues being processed.
Why is this important?
Because currency is something you use every day of your life, and it has a huge cumulative impact on you. For instance, the government inflates the US dollar between 3 - 11% a year right now.
If they inflate 10% of the dollar's value away, that's money stolen from everyone's paycheck and savings accounts.
In short, governments are abusing their control of their nation's currencies to enrich themselves and their allies.
Whenever you hear the term "quantitative easing" in the news, that means they're going to inflate, because they believe it will help the economy.
They think this because inflating--or devaluing--your currency causes your exports to look cheaper to other countries whom then benefit by the exchange rate. Thus, the first country to devalue will see a large inflow of currency from other nations.
Did you know that Venezuela devalued their currency by 46% a day ago? It's the first nuke in what's being called
the coming global currency war. Japan is expected to lob the next round--they've just announced
unlimited quantitative easing. Our own government announced unlimited QE a few months ago, and officials have even tralked of minting a
trillion dollar coin to pay off our debts.
In short, the governments of the world are getting ready to fight each other to see who can inflate the best. And the losers will be the citizens of those countries.
When Greece and Spain began having major fiscal problems, the citizens of these countries realized inflation was coming and began looking for a value-hedge. Many of them chose bitcoin, but not enough knew about it even then.
Many in Argentina have been trying to buy bitcoin, now that the government there won't allow their citizens to buy dollars on the free market for fear that the citizens would abandon their national currency. But they can't stop bitcoin unless they turn off the internet, which they cannot do.
Where is bitcoin now? Two years ago or so one bitcoin was worth mere pennies. In fact there's a famous story about an early miner who had 10,000 bitcoins and offered that sum to anyone who would bring him a pizza.
That number of bitcoins would be worth $230,000 today!
You read that right. One bitcoin today is worth
~$23, with an overall market cap of $220 million. Still fairly low! But a significant sum.
How I wish I had been involved two yeas ago! Recently I bought bitcoin for the first time, on Coinbase, at ~$19. I've made a nice sum already.
But I'm not going to sell. I'm convinced that this idea is only slightly ahead of it's time. What I'm telling you is that you may not be in on the ground floor--neither was I--but this is the 2nd floor of a skyscraper.
We may see digital currencies supplant national ones within our lifetime. If the whole world eventually moved over to using bitcoin then the numbers become unbelievable. In fact, if only one economy switched to bitcoin, the price of one bitcoin would multiply practically overnight.
Let's say everyone in the world switched to bitcoin. That would mean that 7 billion people each want bitcoin, but the number of bitcoin is cryptographically limited to only 21 million, ever. Which means we would have to divide them. They are near infinitely divisible.
So, each person on the planet could hold only 0.0003 bitcoin, three millibits. But here's the rub, that would have to equal their yearly pay! Which is about $10,000 on average. If that happened, then 0.0000003 btc, or three ten-millionth bits would equal one of today's dollar >_>
Okay, crazy numbers, sounds impossible, plus it's ME telling this to you, I have all sorts of crazy ideas, right? Sure. Why don't you read
the FBI's report on Bitcoin, designed to introduce politicians to the currency.
If you're done there, here's a few more to peruse:
http://www.reddit.com/r/Bitcoin/
http://www.weusecoins.com/
https://coinbase.com/
And remember this day! If you blow this off now, at least remember that you were told. One day when Bitcoin starts making headlines and the price is in the four-digits and above, remember that when I told you about bitcoin, the price was only $23!
Bitcoin?
