Posted by Allison on 25 October 2013, 17:13
Bitcoin has been around for some time. And yet few people have heard of it. Those that have hardly know a thing about it, except for the supporters who are passionate about it and spread the word to anyone or anything capable of listening.
For starters, Bitcoin is known as a cryptocurrency. This is because it must beat one of the big challenges to any digital currency. Cryptography is used in association with the Bitcoin so it may not be spent more than once. Since it is a virtual coin, it can be replicated, which is why cryptography is put in place to prevent this from occurring.
But let’s get back to the point. This currency is not owned by a government. It is – perhaps rather unbelievably to begin with – open source. This means anyone can make changes to it, although in this case a majority must approve any change in the software used to create it. Another intriguing fact about the Bitcoin is that it is limited. When the US dollar – and some other currencies – was backed by the Gold Standard, the dollar was worth something. Nowadays many currencies are known as fiat currencies. This means they are essentially worthless, and this in turn means the governments are in control of them.
You’ve probably heard of governments printing money to put into the system to try and get things moving again; it happened not too long ago. With Bitcoin this can’t happen, because the number of coins created will eventually stop. This means the number will be controlled instead of someone simply deciding to expand the number in virtual circulation.
Bitcoin may be a long way from transforming the way we think and act around money. For starters it needs to go from being a currency used by a few to something more people know about. This could take a long time and needs to be achieved before we can even think about introducing it to a wider audience.
And what would happen to the limited release of virtual coins then? Could it mean there isn’t enough cash to go around? We might find out sooner or later.