12 January, 2018
I got myself a Bitcoin wallet. The particular wallet program I had downloaded got serious about keeping my wallet secure. I had to download Google Authenticator on my phone, scribble down an extremely long password as a backup in case fraudsters got to the account, and then make another lengthy password for regular use. It freaked me out a bit about how seriously Bitcoin was taken, and how actual money I spend with Bitcoin could be lost in seconds due to outside forces. This was no easy task for even the technologically-minded person I am. After getting the Bitcoin wallet, I had concluded that I shouldn’t buy even one dollar worth of Bitcoin.
This Bitcoin thing has been all over the news lately. What is Bitcoin all about?
Bitcoin, unlike any other currency, isn’t backed by a government or authority. Instead, it is maintained by many individuals, where more people investing in the currency is better. If you have a can of soup, and investors decide to invest in your soup, your soup is now incredibly valuable. Bitcoin works in the same fashion, with Bitcoin being worthless if the investors hate your soup.
Why would anyone want to get Bitcoin?
People like Bitcoin because they can send money to anyone else in the world with the click of a mouse. The network is partially anonymized, so people can buy money regardless of its source. However by late January Bitcoin took a massive hit, scaring investors and even prompting the creation of a suicide hotline for people impacted by the crash.
How does Bitcoin work if it isn’t in the form of a coin or paper note?
Bitcoin is maintained by computers, but the data is processed by people called miners. People who have the massive computers to process the data of Bitcoin transactions are called miners. Many miners are in China, where regulation on Bitcoin mining is sparse. However, in recent months, China has pondered regulating mining due to the sheer amount of energy consumption of the mining computers. This has recently triggered the catastrophic plummet of the new cryptocurrency, with the value of one Bitcoin dropping below half its peak price of $20,000.
How does mining work?
Mining involves incredibly powerful computers making exceedingly complicated calculations on every Bitcoin transaction. As we’ve seen recently with Kodak’s decision to lease mining computers to the public, mining is a lucrative business and is growing more each year. When you request Bitcoin from a website (the only way to get Bitcoin), Bitcoin is created by mining computers.
How variable is the price of Bitcoin?
The price of Bitcoin is extremely variable and the price is almost totally fueled by speculative investors, not by decree of government. If you’re contemplating buying large amounts of Bitcoin or other cryptocurrencies (currencies that are only on the Internet), think twice. The price within the last twenty four hours has fluctuated dramatically, so you probably shouldn’t invest in Bitcoin (but don’t look to this article for any financial advice).
What about other cryptocurrencies?
There are certainly other cryptocurrencies out there, including Ethereum, Bitcoin Cash (a split-off from the original Bitcoin) and Bytether. These variants are created (“forked”) by making a new set of rules for wallet programs and mining computers to follow, and are recorded at what time they split off from Bitcoin by what block was recording data at the time of the split. Most of these cryptocurrencies are created to speed up payments or to centralize recording of payments, as demonstrated by Bitcoin Cash.
Wouldn’t the forking of Bitcoin damage the number of users of Bitcoin?
Strangely, after Bitcoin Cash split from Bitcoin (Classic), Bitcoin reeled for a short amount of time, but ultimately rebounded. At present, most Bitcoin wallets support both versions of Bitcoin.
How sketchy is Bitcoin?
The Bitcoin isn’t inherently criminal, but it can be criminal due to the obscuring of the data of who purchased what. However, you’re not fully anonymous. You still have to register a debit or credit card to get Bitcoin, thus exposing your Bitcoin purchasing to your credit card company.
Is Bitcoin secure?
Bitcoin is secure, as long as you take security measures equivalent to your bank account. Don’t share your password, and don’t lose the device your Bitcoin wallet is on.
Overall, Bitcoin is a novel idea now, being a quick and easy way to transfer cash between technology-conscious people. However, at present it has serious flaws. No wonder Bitcoin is described by people as a “collective delusion.”