What Is Bitcoin?

You are probably wondering, if you’ve decided to click this page, what exactly is “Bitcoin” and how do I get some. I’ll answer both questions for you.

Simply put, Bitcoin is a purely digital currency that isn’t backed by any organization be it political, financial, commercial, or private. No one says, “Bitcoin is worth so much because we promise you it is worth that much.” For what it’s worth, that’s what governments do with the national currency they authorize. They back it with a promise of its worth, essentially imposing by law or regulation a value on their currency (hence the term ‘fiat currency‘). Bitcoin is free from such regulation. How does it have any value at all? Well, partly through scarcity. There are only so many whole Bitcoins in circulation, though Bitcoins are denominated in units down to 10-8 decimal places (with the smallest unit being called a satoshi). Basically 100,000,000 satoshis is equal to one (1) Bitcoin. You might here reference to millibitcoins and microbitcoins, but they are just a shorthand way of writing/talking about large amounts of satoshis.

Where does it derive it’s value from, then? There are a lot of arguments about how to derive it’s value. Some say it’s value should depend on what it can be exchanged for in fiat currencies on the open market (see Mt. Gox and BTC-E for more about the open exchange of Bitcoins for fiat currency). Currently, as of this writing, BTC-E says 1 Bitcoin is worth $88USD while Mt. Gox says 1 Bitcoin is worth $95.40. As you can see, relying on the exchanges for a value is probably not a good idea. They not only vary widely amongst each other, but also within a day in their own trades. Probably a better argument for their value lies in their utility, or – in other words – what are they worth to you? Is 1 BTC (a shorthand way of writing Bitcoin when talking about it as a currency) worth only a Big Mac? Or is it worth several years of domain name registration? Is it worth a soda at the convenience store or as a down-payment on services? Is it only worth a single poem or an entire collection of poetry from a new author? To go along with this is, how many different places make it easy for me to spend my accumulated Bitcoins? Is it hard? Do I need a paper-wallet when I go to the store or can I load up some coins on a debit card? What about physical representations of Bitcoins? Well there are a few, such as Casascius Coins and BitBills (though C|Net warns of their legality).

In the end, though, I personally believe Bitcoins will work out as a wonderful means of conducting private, mostly-anonymous, on-line transactions and helping to facilitate off-line ones as well. The fact that Bitcoins have been used in both legal and – as the aforementioned C|Net article mentions – illegal transactions, is proof that they are here to stay. People are finding worth and value in them aside from a means to quickly make large sums of fiat currency. This is why we’re risking building a business centred around Bitcoins. We believe they have an intrinsic value based on their utility. We aren’t terribly concerned what the exchanges say about their value. We are concerned, however, about what you say is their value. As long as a group of people continue to see enough value in them to exchange their goods (digital or otherwise) and services for them, Bitcoin will have a place on the Internet as a viable currency that isn’t controlled by “greedy banks” and “spying governments” (we make no allusion about the greed of banksters or the propensity of governments to spy on everyone they can; both are known as pretty well established facts). It is peer-to-peer (P2P) controlled, with each node adding to the veracity of each transaction.

More information can be found at these locations:

There are more sources, feel free to search for them but the above are the most authoritative.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s