Bitcoin: A Virtual Currency
March 18th, 2012
Bitcoin is a digital currency first issued in 2009. The system uses peer-to-peer networking and cryptography, without a central authority. Bitcoins are created by a process called “mining”, where users perform work and receive Bitcoins as payment. To prevent long-term inflation, the total number of Bitcoins will cap at 21 million. And yes, you can actually use Bitcoins to purchase stuff from some retailers who accept them.
Bitcoin is, however, having some problems. Hackers have had some success (link 1, link 2) at stealing the digital currency, and there’s also a piece of malware that uses compromised computers to mine Bitcoins. (Note that these hackers aren’t attacking Bitcoins themselves, which are protected by strong cryptography; instead, they’re going after the software that people use to manage their Bitcoins.) Of more import is the wildly-fluctuating exchange rate against the dollar. What’s the point of purchasing Bitcoins with cash, only to subsequently have their value plummet? Of course, this is a problem with any currency, but Bitcoins have had some severe drops.
Update: Not everyone agrees with my assessment that Bitcoin is failing. See the comments for details.
Update #2: I’ve modified the title of this post, as well as the first sentence of the second paragraph, to do away with the notion that Bitcoin is failing. I still think, however, that it has been having problems.
Link #1 (Bitcoin explained): http://arstechnica.com/…
Link #2 (Bitcoin articles at Ars Technica): https://www.google.com/…
[link]Anon Says:
March 18th, 2012 at 1:00 pm
Last I checked bitcoin appears to be working just fine…
http://www.bitcoinwatch.com
[link]Anon Says:
March 18th, 2012 at 1:05 pm
Over $2,100,000 worth changed hands in the last 24 hours. Yup, working just fine. Bitcoin is more of a “community currency”.
[link]bc Says:
March 18th, 2012 at 1:19 pm
Hi Chad,
Re:
[link]Mark Says:
March 18th, 2012 at 9:22 pm
Suggesting bitcoin is failing is like suggesting email is failing becasue people get phishing messages, have passwords stolen, receive tons of spam and receive attachments containing viruses.
email and bitcoin are similar – they are both raw protocols of transfer. We can interact with those protocols however we want. Bitcoin is new and is currently at the stage of development where email was in about 1987. ie it’s technically quite difficult (the project is still in beta).