In the last few years, but especially in 2013, a new type of “digital currency” has been making headlines. Called “Bitcoins” this new type of money has gone from a value of mere pennies to nearly $1000 per bitcoin apiece (depending on who’s opinion you trust most). Not only that but the growing popularity has allowed Bitcoins to not only help a new democracy movement get its start but also fund massive amounts of illegal weapons and drugs, much to the chagrin of police forces around the world
The only question really left answer is simply this; what exactly are Bitcoins?
Unlike that coin you swallowed as a child, Bitcoins are completely virtual and thus can’t even be held in your hand. The simple fact is that they exist online only and, much to the chagrin of federal government entities like the Federal Reserve, are not controlled by any single, central authority. An excellent analogy is that if hard currency like a dollar bill is a LP Record, Bitcoins are like an MP3.
Indeed, you don’t get them from the bank and you can’t hold them in your hand. You can’t even drop them in a wishing well as all of the transactions taking place with Bitcoins are on an open marketplace online and absolutely untraceable.
Unlike the safety and security of the bank, they are not guaranteed and not protected by federal institutions like the FDIC. If your online “wallet” happens to be stolen or hacked, any and all Bitcoins that you might have there will be gone for good.
Now if you think that might sound a bit weird (as well as scary) consider the fact that Bitcoins enter into the monetary market using a process called “Bitcoin mining”. Using extremely complicated and encrypted computer programs a person can use their computer to solve mathematical problems that will “release” new Bitcoins onto the marketplace and into their online wallet.
At this point the Bitcoins that were available by solving the “easiest” mathematical problems have already been discovered. In order to find more the computing power needed is absolutely huge and has led many Bitcoin “miners” to hack dozens, and sometimes hundreds, of computers from unsuspecting owners and use their computing power to continue their mining operation.
When it was put together the system devised for this new type of money was actually designed to make it harder to get new coins as time went by, something that has already allowed them to grow in value at a steady and predictable rate. In fact, out of the 21 million Bitcoins that are said to exist in total, nearly 11 million of them have already been found.
Using the new coins is as easy as using any other type of money online except for one small catch; a business has to accept Bitcoins and, as of now, very few actually do. If you happen to find a company that accepts your Bitcoins you simply need to get the identification number of the seller’s wallet and transfer coins from your wallet to theirs.
Of course this is one of the reasons that, as we mentioned earlier, drug and weapons sales have increased so much using this new currency. Since they are completely untraceable they make for the perfect currency to purchase illegal goods and services of any kind. Even better, they can easily be transferred between sellers and buyers anywhere in the world.
For now, as long as they’re being used for legal purchases, they are completely legal. That status may change however and, if you’re looking for a recommendation from us, were not quite sure we’re ready to give one yet.