Bitcoins: Money you cant touch
I wrote a piece previously on The Deep Web which you can find Here and briefly touched on Bitcoins and promised that I would write a piece about them.
What are Bitcoins?
Bitcoins are a digital currency launched in 2009. It was originally joked and laughed at but has grown significantly over the last few years. They have really come into their own since 2014. There have been digital currencies in the past but none have taken off quite like Bitcoins have. There is a stigma that the only people who use Bitcoins are people who wish to purchase illegal goods on the dark web but this is very far from the truth. Although the currency is the primary payment used on illegal internet sites it also provides very useful alternatives to retailers worldwide. For example, credit card companies charge vendors for using their card systems which can be a set fee or a percentage of the transaction (depending on where you are and your provider). The credit card fee is typically between 2 and 4% whereas the fee for using Bitcoins can be 0-2% which will make a difference to any business.
The system works on a Peer to Peer basis so there is no need for an intermediary. The system is maintained by its users referred to as miners. Miners run computers that maintain the blockchain in which all transactions are recorded and verified using cryptography. A major pitfall of a currency that has no physical weight on it is that if it gets lost then it stays that way. When you buy coins they are assigned to your wallet address which contains your private key. If this key is lost, it’s lost forever. There was an unverified story of a guy who lost his private key when he discarded his hard drive. It was claimed that he was the owner of 7,500 Bitcoins which at the time had a value of 7.5 Million USD.
A digital wallet is needed for you to easily buy and spend Bitcoins. There are many versions and the speed that you can get up and running will largely depend on the wallet you decide to use. Go here and decide which wallet you want to use but do choose carefully and no matter what wallet you go for back it up and then back up your backup! I use Bitcoin Knots which is fine for the occasional purchase I make but it involves downloading the entire blockchain which is every piece of data for the last 7 years to my hard drive. This equates to around 50Gb of data that must be updated every time you want to spend your bitcoins so it may not be practical for everyone. There are other options so have a good read and make the choice that suits your needs.
Bitcoins, like any currency rise and fall but just check out the graph below which shows the rise of Bitcoins. From 2015 to 2016 they have increased by 300%. If I had all of my money I would be quite happy now but because this is a digital currency, the whole thing could potentially fall down around us so investment is not a wise move at this time.
Where to buy Bitcoins:
There are many places to buy Bitcoins and although I buy mine from a specific vendor, I’m not going to endorse. Do your homework and buy from a trusted vendor. Make sure you get value for money. I have seen people giving awful exchange rates as well as charging a percentage of your local currency which on a large purchase will definitely sting. Also be aware that because the value goes up as well as down, you could end up paying more for your goods than if you use cash. Of course, it can go the other way too.