By Joshua Ostrer
It’s not too often that you hear about a new currency. Most currencies are created and maintained by governments.
But what if there was a new worldwide currency that operated completely on the Internet? There is, and it’s called the Bitcoin.
The Bitcoin, first introduced on Jan. 3, 2009, is an online currency, not issued by any government. Instead, the currency is generated by solving a complex cryptographic code with your computer.
If your computer happens to find a solution to the cryptographic code, you’ll be rewarded by receiving a Bitcoin.
However, solving the cryptographic code becomes harder and harder as time goes on. If you tried solving the code back in 2009 you might have only needed your household computer to earn a Bitcoin.
Today, groups of people are connecting CPUs together to create supercomputers designed solely to obtain the new currency. These setups of Bitcoin-mining computers are so complex that they are racking up extremely high electricity bills.
Despite these high costs for operating Bitcoin-mining operations, the miners are still making a substantial profit.
According to blockchain.info, a Bitcoin tracking site, Bitcoin-miners are making their highest profits of all time, garnering anywhere from 52 percent to 85 percent operating profit.
Currently, 25 Bitcoins are generated every 10 minutes. Bitcoins will continue to generate until there are 21 million in circulation. This process will be complete by the year 2140.
However, each Bitcoin is divisible into eight decimal places, meaning the currency can potentially be divided into 2.1 quadrillion units.
Not only is the Bitcoin mineable with a computer, but you can use it to buy and trade items online.
Services like BitPay provide the ability for businesses to accept Bitcoins as payment, converting it to USD at a .99 percent cost for the conversion. Alternate online payment forms like PayPal cost 33 percent to 3 percent, and Visa and MasterCard cost 13 percent to 3.5 percent.
Any and all Bitcoin transactions are also anonymous. While the transactions themselves never include buyers’ or sellers’ personal information, there is a log kept, detailing every Bitcoin transaction that takes place across the world.
However, with many people buying Bitcoins in the hope of increasing value, the word is cautious.
Even Bitcoin’s official website cautions users: “Bitcoin is an experimental new currency that is in active development. Although it becomes less experimental as usage grows, you should keep in mind that Bitcoin is a new invention that is exploring ideas that have never been attempted before. As such, its future cannot be predicted by anyone.”
The Bitcoin has been making headlines recently, largely for this reason. While the Bitcoin’s price sits at $110 on April 15, just five days before, the price reached far higher. In two days, April 9 and 10, the Bitcoin increased in value from $160 all the way up to $260 before falling down to $160 only six hours later.
While the Bitcoin’s value has been fluctuating, some experts believe this miniature bubble burst will strengthen the currency going forward.
Another concern associated with the Bitcoin is its anonymous use.
The ability to use the currency for anonymous transactions has led to a few morally questionable uses online. Bitcoins have been used in online drug transactions, conducted using the service “The Silk Road” and the illegal purchasing of weapons online.
The Bitcoin is a new currency and is gaining notoriety, but its future remains uncertain. How far the Bitcoin will go remains to be seen.