Shoppers regularly hand over credit cards when checking out, but a new form of digital currency, called Bitcoin, is increasing in popularity. In fact, the value of all bitcoins in circulation is about $1.3 billion in United States currency—a number that simply cannot be ignored.
Better Business Bureau serving Alaska, Oregon and Western Washington offers insight into this new “cryptocurrency.”
The popular payment process is coming under strong governmental review. The Washington Post is reporting that federal investigators have frozen some payment plans. Some news organizations are predicting the end to the payment method, adding that a larger system will step forward to take its place.
Bitcoin first gained attention when Gawker described how to use it to buy drugs. No action was taken two years ago, and its popular usage grew exponentially.
What is Bitcoin? Bitcoin is a digital currency which allows anonymous and instant peer-to-peer payments. The Bitcoin system uses a shared public log called a blockchain, which has all verified payment records in chronological order—allowing everyone on the network to see every transaction.
Where do bitcoins come from? Bitcoins are intangible and must be digitally “mined.” Computers connected to the Bitcoin network compete against each other to find solutions to extremely complex mathematical equations, the first to crack the equation is awarded with freshly minted digital coins. There is a set ceiling of 21 million bitcoins and it is expected that they will all be unlocked by 2140.
How can bitcoins be used? Computer programs and smartphone applications allow users to anonymously exchange real money for bitcoins and many retailers — both online and offline — now accept bitcoins as payment for goods and services.
Are there any dangers to using Bitcoin? Bitcoin is not backed by any single government or organization; its value is recognized solely by its users—consumers and businesses. The Bitcoin exchange rate fluctuates continuously, making it high-risk currency.