Smartphones have offered up apps for just about any and every activity that can possibly be done from a hand-held device. And now a relatively unknown digital currency, created and exchanged solely between individuals, can not only be stored with an app, but potentially be used as your primary medium for commerce.
What is Bitcoin?
Bitcoin is an electronic currency that was created in 2008 by an inventor known only as Satoshi Nakamoto. Though nobody exactly knows who he is (or if it’s more than one person), most presume Nakamoto is a U.K. resident because he has spoken in podcasts and interviews; and has a British accent. Bitcoin allows people to conduct transactions without a middle man, instantly and globally.
The currency (which is debatable as to whether its really is money) is different from other world currencies (like the dollar, euro and yen) because there is a finite amount of it that can possibly be produced. It is also valuated based completely on supply and demand, as opposed to fiat systems used by world governments that arbitrarily value its currencies.
How Bitcoin Wallet Works
Bitcoin Wallet is an Android-compatible app designed to act as a storage and transaction mechanism. It is purely peer-to-peer, so there are no additional services needed to make transactions between two people. For instance, if you want to buy a computer advertised on Craigslist, if you and the seller both use bitcoin, you can use the app to make the complete transaction. And just like any bitcoin exchange, the transaction costs are usually fractions of a penny. For what its worth, reviews for the app are more than 75 percent positive.
Is Bitcoin Real Money?
This is a question that would require more space than one simple blog post. A few larger companies, including WordPress, are now accepting bitcoin for payment. Bitmit is an alternative Ebay where users list items and only accept bitcoin as payment.
One argument for bitcoin being real money is that it takes computer time (labor) to produce it. Not to mention, the producers are referred to as miners, as if they are mining for bitcoin like they would US Money Reserve gold bullion. There are only so many bitcoins that can possibly exist due to a limited series of numbers which miners can discover that equal an actual bitcoin (only really technical people will understand the necessary protocols and algorithms). Only 21 million bitcoins can possibly ever exist in circulation, but their divisibility is virtually unlimited, according to Donald Norman, CEO of London-based Bitcoin Consultancy. They can be divided by up to eight decimal places. Bitcoin, as of mid-March, have an exchange rate of about $50 for one bitcoin.
Bitcoin is completely open source, thus cannot be controlled or regulated by one person or entity. U.S. senators Chuck Schumer, D-N.Y., and Joe Manchin, D-W.V., pressed the Department of Justice to crack down on the website “Silk Road” because there were allegedly drug transactions done there using bitcoin. Forbes reported that the Financial Crimes Enforcement Network, a branch of the U.S. Treasury, now requires all bitcoin miners to register with them as a Money Services Business (MSB). Enforcement, however, will be difficult since bitcoin miners are anonymous, as are all transactions. Bitcoin is also not a recognized currency, thus is technically nothing more than a glorified bartering system.
Those wanting to add Bitcoin Wallet to their collection of smartphone apps should do more independent research on the digital currency before diving in.
Author: Raymond Walker The son of a banker and an accountant, finance has always been Ray’s forte. He offers his readers advice on managing their personal and business finances.