Wednesday, October 24, 2012

Bitcoin: Concept & Currency



If you're reading this you've probably at least heard of Bitcoin, but you may not fully appreciate its depth and game-changing nature. The concept of Bitcoin is much more important than the actual currency. So what exactly is Bitcoin? The web definition is pretty general, but accurate:
Bitcoin: A decentralized digital currency created in 2009; A client for the aforementioned currency.
So what does that mean? Let's start by listing come common currencies: US Dollar, Euro, Japanese Yen, Swiss Franc, Canadian Dollar, Chinese Yuan, etc. All of these currencies are issued by central banks that are more or less controlled by governments. At the basic level a currency is a method of account. This is a very important concept to grasp. If you do work for someone they pay you a fixed amount of currency for your services or products. Currency is simply the medium of exchange that measures the value of real assets or services. In a nutshell, it's an accounting system.

What is a decentralized digital currency? It's an electronic currency (without a paper or metallic form) that isn't issued by a central authority (decentralized). Even that is quite ambiguous. You can think of it as an online accounting system that acts as a currency. A more thorough description can be found here: http://www.weusecoins.com/. Generally, these new currencies are referred to as cryptocurrencies, which is derived from the underlying mechanism in which they're 'secured.'

Currently the market cap of Bitcoin is just over $100M and is expected to rise dramatically as technology and services are built around it. In the coming decade you will begin to hear more and more about said currencies as they begin to diffuse into the economy and disrupt the status quo.

Additional Information about Bitcoin can be found at a number of sources, but here's the short-list: