What is Bitcoin and How to Get Started
- April 16, 2013
- General, Payment Services, Tutorials and Guides
In the depths of the recent global recession, consumers and developers everywhere were looking for an opportunity not only to make money and survive the collapse of financial markets but to insulate themselves from the kind of monetary damage that had been done to people all around the world at every level. Some people turned this fervor into purchases of gold, rare coins, or other precious metals and objects that were guaranteed to hold onto some of their value in the face of economy decline. Others, though, took to the Internet and developed a “virtual” currency known as Bitcoin. The currency has no real-world counterpart or component and its value is driven purely by demand for the virtual currency itself.
Over the course of its existence, the currency has experienced big surges, and subsequent big drops, in its overall value. At its height, one coin was worth as much as US$30. A subsequent crash in value found one coin to be worth just US$5. Despite its troubles, though, Bitcoin has never succumbed to predictions of its death or calls for its ouster in the online financial world. That’s largely due to the unique way that the currency is earned, transferred, and spent.
A Purely Virtual Currency is Much More Versatile than Paper Money
For centuries, currency has been regulated by the country that issued it. In the United States, the value of a dollar is largely controlled by the Federal Reserve. In Europe, countries must answer to the European Central Bank. The pattern is familiar and nearly universal in every country that manages its own currency, or is part of a currency union. This virtual currency, though, is not regulated by any central authority. Instead, the value of this online currency is driven purely by the overall demand for it. As more people seek to earn and spend the virtual currency, its worth increases. When the opposite happens, its value decreases. No regulatory body governs its value, or where it can be spent, or on what it can be spent.
That’s a big draw for those who deal almost exclusively in online commerce. Accepting a virtual currency allows online stores to forego transaction fees and surcharges that are typically levied by local governments, online payment processors, and the credit card companies themselves. Being able to conduct business with consumers without paying high fees to the likes of MasterCard or Visa results in increased net profits without much of a need to increase sales.
Furthermore, the lack of central regulation that applies to virtual currency purchases means that accumulated funds can be used to fund organizations that would otherwise not be able to accept currency. Perhaps the best example is Anonymous, the group of hackers that has caused numerous international governments a fair bit of embarrassment. The currency can also be used to buy things online that would be considered illegal by local governments. From banned prescription drugs to merchandise sold overseas, this is a big selling point no matter how sketchy it might seem at the outset.
Becoming a Miner: How to Earn Virtual Currency
This unique form of money is not earned in traditional ways, which should be expected since the currency is nontraditional in every other way as well. When the idea of virtual currency first came to light, the primary way to earn the virtual currency was to dedicate a computer to running complex mathematical equations that required distributed computing in order to be fully solved. This communal approach worked with the currency’s ethos of communal earning, community-governed trading and valuations, and the separation of virtual coins from paper currency.
While that method of earning currency is still popular, the popularity of the currency has expanded its earnings opportunities. Nowadays, those looking to earn the popular virtual currency can simply log onto an online marketplace and begin selling things in exchange for virtual money. Auctions exist for everything form electronics to services rendered, and payment is accepted exclusively in Bitcoins. Furthermore, those who wish to get a head start on earning Bitcoins can actually trade existing currency, like dollars or euros, for virtual currency at its current matched value. If one Bitcoin is currently trading at $10, for example, ambitious traders could trade in $100 for 10 coins. The currency could then be spent at any location online that accepts the currency.
Getting Started: Make Sure to Secure a Wallet
Most people store paper currency in a wallet, and this virtually currency is no different. Of course, the wallet itself is a bit different than most people might be used to. In order to store currency and keep it safe, the company behind the currency has developed the Wallet program for Windows, Mac, and Linux. This wallet is maintained by opening a user account associated with the currency, and that user account will be tied to any earnings or transactions made using Bitcoins.
With the Wallet installed and ready to go, users are ready to start exploring the marketplace for Bitcoin transactions near them, and online around the world. Most frequently, currency is earned by engaging in all kinds of transactions. Some people work online, doing anything from freelance writing to web design, while requesting that all payment be made in Bitcoins. Others open up eBay-style auctions of electronics and other goods while requiring payment be submitted in the form of Bitcoins. Even local Craigslist auctions have turned to the currency as a safe, electronic form of payment that can bypass high PayPal fees, the writing of a personal check, or the exchange of traditional currency.
Proceed with Caution and Take Part in the Revolution
The currency has been called a revolution in terms of the way people spend money, largely because there is no central regulatory authority and there are no restrictions on what can be purchased using Bitcoins. Caution should always be used, of course, especially with an all-digital currency that has no paper equivalent and no real course of action in the event of theft or fraud. With careful attention to the particulars, and cautionary earning and spending, this unique currency can become a way to insulate financial interests from wider economic instability and the restrictions placed on traditional currency by central banks and regulatory authorities.
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