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Future Money: Bitcoin Digital Currency
Perhaps, one day, many years from now, digital currency will dominate the world's financial markets and used in daily life. But today, it is more a curiosity and anomaly. The name for this future money is called bitcoin. It has only been around since 2009. It provides a decentralized and public way to record money balances electronically. Like many things, it is in its infancy and not used much in parts of the world but like software revisions, it becomes more sophisticated with each version. Some money experts call it the most powerful innovation in the past 500 years. Because the code that creates bitcoin is open source and copyright free, some 10,000 developers are working on it globally to make it the wave of the future.
Bitcoin is not like a physical dollar bill or gold coin, but it is just an entry into an accounting system or public ledger that records balances and transfers among special bitcoin addresses. Owning a bitcoin simply means you have a bitcoin address with a secret password with the right to transfer balances to another person. Today, the banks have everyone's ledger or account that tracks the debts and balances of personal and business accounts. Bitcoin balances are shown on a publicly distributed ledger maintained by thousands of computers.
Whenever you use your credit card, the transaction will move through six different institutions that share the account information and will either end the transaction- insufficient funds- or allow it. The store where you bought the item will finally get reimbursed 2-3 days later and the store pays a 2% charge. With bitcoin merchants (82,000 around the world), once you buy bitcoins via online exchanges you have the capability. When you use it to buy an item the same transaction would take only one hour or less instead of the 2-3 day wait until the merchant is compensated. Some transactions take only a few minutes. There are no fees for the merchant. Privacy is total- nobody knows who you are or what you are buying, this is not the case with today's system. Bitcoin currency simply eliminates the middleman in today's money system invented in the 1400's in Italy- banks! Banks control the money ledgers of everyone and secure their information for a fee. Banks hate bitcoin because it threatens there own business to become obsolete.
Bitcoin is new. On a daily basis, $50 million is transferred using bitcoin. When compared to credit cards (that go through banks for a fee), it pales to $32 billion every day. This is what Visa and Mastercard handle and charge a 2-3% fee to use the card. Do the math! What is money? A dollar bill is just paper token with little intrinsic value.
Banks seeing the bitcoin value are now trying to incorporate it into the old way of banking. Doing so, may eliminate jobs but make their survival in the digital age. They see bitcoin as a secure way to conduct purchases using your smart phone or computer.