Bitcoin

When I go to museums, may they be attached to the history of the Roman Empire or Chinese Dynasties or whatever, there is always one department, which I find utterly boring. It is the one with coins. It is not that I find payment systems irrelevant. But those representing thousands of years of royal counterfeits, presidents, dictators and governments, are just too much of the same for me. Sovereigns try to centralize money on themselves, their central banks and treasuries, as a means of control. Only few "currencies" stay independent from that. For example gold, diamonds and alike, which can be transferred pier to pier for payment - if accepted. They are mined, processed, traded and change ownership. There are markets where you can sell them for "money" which is accepted in the grocery store (can't pay with diamonds in mine). When they are lost, they are gone. Nobody exactly knows how much is around. Besides, they also finance wars and crime for example in the form of blood diamonds. But don't think the Petrodollar does not do that.

Very similar work a new set of digital currencies, also called "cryptocurrencies" or "virtual money", of which Bitcoin is the most prominent representative. And this one is quite interesting.

 The sign is still up (October 2015, Bonham Road, Hong Kong)

The sign is still up (October 2015, Bonham Road, Hong Kong)

It is said that Bicoin goes back to Satoshi Nakamoto who created the open source software for it in 2009. It is not publicly known who he is, and not even whether he exists, is a person, or a group of people. All Bitcoin transactions (clocks) are publicly recorded in a log called block chain. As the block chain grows longer over time, the pier to pier transactions can take a few minutes. There is no bank between the vendor and buyer, and charges are payed by the buyer only. Like this there is an incentive for vendors to accept Bitcoin. And the charges are very small, compared with the 2-3% which are for example imposed by credit cars companies. All you need is to open a Bitcoin Wallet. It is like an account. This has an address, equivalent to IBAN and BIC of conventional bank accounts. Should your computer break or get stolen, your wallet is protected by "Wallet Words" and for everyday use, you can simply use a password. There are different wallets available, which run on computers, tablets or smart phone. I use Multibit HD, which is easy to set up by following a simple online tutorial. There are also hardware wallets available, which are for example called TREZOR, and much safer than running a wallet on your computer or phone.

Once you are set up with a wallet, it is like an empty bank account. There are all kinds of silly ways of earning Bitcoins, but the most obvious one is to buy them for a start. You can for example do this with your Paypal Account, and you may find this website useful. By now you already came across the currency appreciations used for Bitcoins, which are for example BTC or XBT. One Bitcoin contains 1 000 000 bits. So, you do not have to look for "small change". There was a bitcoin hype in autumn 2013, but now the price is around 250 USD per 1 bitcoin. You might think, this is risky. But actually compared currently with a lot of currencies from emerging economies, the bitcoin is doing ver well. And just imagine 1 billion of Indians might want a stable currency and free access to world markets leaving behind their official currencies etc. This is interesting.

 Bitcoin versus USD

Bitcoin versus USD

The money supply of Bitcoin is not controlled by a central bank. Like gold, they have to be mined. This happens in the form of solving mathematical problems with computers which are specialized in doing so. The ultimate number of bitcoins is limited (like gold) and the more has been mined already, the harder the mathematical problems get (like gold mining). So, if the demand continues, the value of bitcoins will increase. Now, the mining itself seems a complicated process and I will for now not go into that.

Bitcoin can be only called "money" if they are accepted for the purchase of goods or services. So, who accepts them, and what can I buy with them? There is already a long and list of vendors who take advantage of the fee structure and accept Bitcoin. A nice geographical representation of these, you find here: http://who-accepts-bitcoins.com . To make it short: you can buy anything from a flight ticket at Expedia to a sandwich at Subway.

Of course, Bitcoin are more common to use in internet trade. But then there is a whole virtual world, where all prices are in Bitcoin. It is the "deep internet", which is sometimes also referred to as "dark net". Many people are not aware that beside the mainstream web, there are also very other forms of internet. The dark net is one of them. And then there is also still Usenet, from the time when there was an Internet but no web yet. You access the Deep Internet, by using the Tor-Browser, which you can download from the Tor-Project site: https://www.torproject.org/projects/torbrowser.html.en. You will also need a PGP key to make use of it. And you might also run it in a virtual computer on your main machine (or even on a separate computer) because you never know what happens. Rule number one of the dark net is, not to talk about the dark net. So, why not let somebody else talk about it: Jamie Bartlett on How the mysterious dark net is going mainstream.