For years, the United States economy has used paper money to buy and sell merchandise. They have always tried to update the currency so that the value of the money won’t diminish.
Now, a new form of currency, called Bitcoin, is on the rise. They are a type of digital currency that uses encryption to regulate units of currency, and to verify the transferring of funds.
It was created on October 31, 2008 by Satoshi Nakamoto, but it didn’t release until January 2009.
There are no physical forms of Bitcoins. They are completely virtually encrypted, and can be acquired by mining, which is software that solves mathematics problems on the computer.
The purpose of the Bitcoin is to have buyers and sellers to directly interact without having a “middle man”, and not having to give out personal information.
“One (person) can benefit from Bitcoins or any other virtual currency is that it is completely anonymous,” Douglas Campbell, instructor in the Department of Economics at University of Memphis, said.
This innovation has peaked interest in the United States Congress because they think that it would stop the illegal money transfers, stabilize of the Federal Reserve, and protect Bitcoin consumers and investors.
“There’s not that many Bitcoins in circulation and that it hasn’t been fully adopted,” Campbell said. “In the future, it might become popular, but it will not boost the economy unless it somehow makes buy and sell goods and services easier.”
Like all things that is new to society, there are always some advantages and disadvantages.
Advantages of Bitcoin is that it lowers cost of transactions, increase the possibility of privacy, and protect inflation.
At the same, the disadvantages are that it severely fluctuate the prices, it’s not legal tender, the feel of uncertainty in security, and the vulnerability of Bitcoin “wallets”, which is a digital wallet that can be lost, damaged, or stolen.
“You can purchase some illegal goods, drugs, weapons, or something like that using Bitcoins and it’s not traceable back to you,” Campbell said.
Legal issues have also been brought up, because of the Federal anti-money laundering laws, federal tax laws, and counterfeit criminal statutes.
“I think the reason why it hasn’t garnered widespread option because most consumers in America don’t really have a need for that level of anonymity,” Campbell said.
There are three ways to obtain Bitcoins: A person can exchange their money to an online exchange site, like Okcoin, Coinbase, and Kracken, a person can exchange for goods or services, or a person can acquire them by being a miner, who is a person that watches the transactions for validation.
When it comes to value, the Bitcoins are a little different than what it is in euros, pesos, yuan, and pounds.
1 Bitcoin is equal to $221.40 U.S., $207.21 Euro, $3,378.45 Mexican Peso, $1,371.42 Chinese Yuan, and 149.01 British Pound Sterling.
“I think it is interesting. I don’t think it’s a bad thing, overall, but I don’t think it adds that much value to the average consumer,” Campbell said.
