Navigating the world of tech forums and news you've probably heard some rumblings about Bitcoin (BTC), a digital currency that's growing in popularity.
The idea behind Bitcoin is that users have a digital currency not controlled by any centralized bank or government but rather something for users, by users. Launched in 2009, Bitcoins exist entirely in the digital world, but strides are being made to make it more accessible to users.
In fact, the world's first Bitcoin ATM recently opened up in Vancouver, allowing users to convert real-world cash into the digital currency. So far the machine has seen around $100,000 pass through it.
For some, Bitcoins represents a potentially lucrative investment opportunity. A story making the rounds online is that of a Norwegian man who bought about $27 worth of Bitcoins four years back, only to see that amount grow to be worth more than $1 million this year. At the time of his original transaction, the currency was still starting up and the man was able to snag around 5,000 Bitcoins for the price of a meal and a movie. Having forgotten about his purchase four years ago, it wasn't until earlier this year that he logged back into his account to find his coins worth the equivalent of $1.1 million. At the time of this writing, a single Bitcoin was worth roughly $330.
Another interesting note is that because it's also entirely digitally based, people can trade, sell and purchase decimal points of Bitcoins far smaller than what we would compare to as a penny. Those wanting to purchase a cup of coffee in Vancouver using Bitcoins can do so for .0101 BTC.
Others have been using Bitcoins as the currency of choice due to the anonymity provided, as transactions do not require personal information from users.
The recent bust of the drug market website Silk Road in the U.S. highlights precisely that, as users dealt exclusively in the digital currency to buy and sell drug transactions online for years before being shutdown by the FBI this past October.
Elsewhere, legitimate businesses, such as online retailers and even brick-and-mortar stores are beginning to accept Bitcoins. The Waves coffee shop in Vancouver, where the first Bitcoin ATM was set up, also accepts them as a form of payment.
As with any currency, the value of a Bitcoin is determined by the number of people willing to value it. As more legitimate businesses begin to accept it in exchange for tangible goods, that value would likely go up, especially knowing that there will only be a finite amount of Bitcoins in circulation.
Currently, there are about 12 million Bitcoins in circulation. Each year more are released and the total number of units will be capped once it reaches 21 million, which is expected sometime around 2140.
But while Bitcoins may present an interesting currency for some to use, or an investment opportunity for others, there is still the risk of storing one's money in an entirely digital form without a centralized controlling body. Because there is no one bank or website, overseeing all Bitcoins, several sites have popped up to act as transaction processors and storage sites.
Last month one such site, inputs.to, was hit by hackers that stole $1.3 million worth of various users' Bitcoins. Since the currency is not being formally recognized in many forms, crimes involving Bitcoin theft aren't likely to be pursued to the extent that bank account fraud would.
On the official Bitcoin site, it's noted that, "keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen like a high-risk asset, and you should never store money that you cannot afford to lose with Bitcoin."
For now, Bitcoin is an interesting prospect worth keeping an eye on, but probably not worth keeping your money in.
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