Web Currency Bitcoin Leaves Many Scratching Their Heads

by Klaus on August 29, 2011

in Articles

There’s an interesting market that’s opened up lately and it has left many people scratching their heads: Bitcoins. Bitcoins are a type of currency. Most every country has their own currency or has adopted another country’s money as their own. These real-world currencies are backed by central banks, governments, and other organizations that give the money value and worth. So, what do you give a currency that has none of those, and for all intents and purposes, doesn’t even exist? That’s what you’d call Bitcoins.

Bitcoins is an electronic currency that is not backed by any government or institution. It has no central bank and is solely backed by the people who use it. Its worth is based on the value of the peer-to-peer system of exchange that occurs through the web. We’re familiar with emailing, chatting, and doing info searches and Anywho’s reverse phone number finder, but what do you do with a currency that is only good on the web?

Ever since the web was created, more people have found ways to retreat to an online reality. Some argue that social media, online gaming, web avatars, and online dating are just extensions of this web reality that people have invested so much stock in. Some argue that this world should also have it’s own currency.

Many worry that this whole system is unstable to begin with. Gavin Andresen, a programmer that’s worked on the bitcoin system, says himself that, “even though this currency is a lot like cash, it doesn’t exist and there’s no center to the whole system.” Yet, for people like Andresen, that’s part of the appeal. Andresen states, “For me that’s more comforting than thinking that politicians or central bankers won’t screw it up. I actually trust the wisdom of the crowds more.”

As the Internet has freed the access and exchange of information, some feel it should also foster the same approach to currency. Bitocoin is, in fact, doing quite well. Not long ago, you could get a single bitcoin for something like seven U.S. dollars. After a story appeared on Gawker, a website that featured a story that talked about how people were buying illegal drugs like heroine and LSD by exchanging bitcoins, something strange happened: the price value tripled. Now it costs over twenty dollars to buy a single bitcoin.

This isn’t to say that people are getting bitcoins for nefarious reasons. They’re using them to make simple purchases and exchanges like sweaters and shoes. It works just like electronic transfers of money that most people do when shopping online. The thing that worries economists is that people will invest too much worth in these currencies and end up losing their investment. A near triple worth hike isn’t healthy for any currency. The old saying, what goes up must come down, well…when a currency is that volatile, what happens when there’s a triple value decline? That’s what’s so worrisome about such currencies. With that said, people still seem very interested in this form of currency and it’s gaining in popularity and use.

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Mandeep August 31, 2011 at 04:31

Bitcoin is a very interesting concept, and if I had a much faster GPU I’d consider mining a few bitcoins out with the GPGPU software available. There’s even some kind of distributed malware that hijacks people’s GPUs for use in bitcoin mining. Not sure how profitable that is, but it’s a clever use of graphics hardware.
Mandeep recently posted… Low Power Gaming Graphics Card

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Daisy September 1, 2011 at 00:31

A near triple worth hike isn’t healthy for any currency. The old saying, what goes up must come down, well…when a currency is that volatile, what happens when there’s a triple value decline? That’s what’s so worrisome about such currencies. With that said, people still seem very interested in this form of currency and it’s gaining in popularity and use.

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Tim September 11, 2011 at 21:02

I had actually never heard of bitcoins. I would not feel comfortable using a currency that is not backed by any banks. Any serious merchant is not going to use this – what’ the point unless you are trying to hide something?
Tim recently posted… Common Golf Terms

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Veronica Cervera October 25, 2011 at 08:02

A very interesting concept. However, i don’t feel like using Bitcoins because to begin with, it’s not backed up by any banks. It’s just too risky.

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