You’ve probably heard of BitCoin, the Internet’s recent attempt at independent currency. It’s been all over the news for reasons both positive and negative – it’s a useful way of transferring funds anonymously, but the currency itself remains volatile and prone to abuse.
Many finance experts, geeks, and fans of Internet security have been watching BitCoin developments enthusiastically, trying to see whether the system really will work. As for actually making use of BitCoin, most people who want to give it a go have found the process confusing and just given up. So, what’s the deal? Will BitCoin ever find a place amongst respected currencies?
The Difficulty With BitCoin
Despite many useful guides written on how to use BitCoin, there seems to be an element of confusion and difficulty present. Even if potential users do understand the complex system they’re often thwarted when they attempt to purchase or mine BitCoins. People who don’t get hold of any currency straight away tend to lose interest.
BitCoin Limits: Buy, Mine & Trade BitCoins
Once you’re set up to use BitCoin, you can buy, mine and trade BitCoins with other people in the system. But you’ll have to use specialist BitCoin markets and software so that the transactions are verified in the BitCoin system. This isn’t a currency that can be converted at your local Bureau de Change.
For instance, a tourism operator in Asia might consider accepting Pounds Sterling or US dollars for their wares as they know they can exchange the currency to their own local currency later and it means that they make the sale on the spot. This is just not possible with BitCoins as users need to be in the system before they can accept payment. Once a person owns BitCoins they can exchange to their local currency, but only via specialised markets and only if there’s a BitCoin buyer willing to exchange. This severely limits BitCoin’s usefulness outside of its own ecosystem.
BitCoin May Face Government Opposition
Due to BitCoin’s anonymity, BitCoin has become the currency of choice for illegal trade, including at least one brazen site dealing in pharmaceuticals. The same anonymity could also cover the tracks of people moving funds internationally. Governments worldwide are likely to consider the currency itself as a threat because of this power, and will therefore look at ways to shut it down or make trade using anonymous currency illegal.
Who would put their trust into a currency that could be easily made inaccessible to them with the stroke of a pen?
The BitCoin Exchange Rate
In recent days, the BitCoin exchange rate has suffered a huge drop in value. This happened once before due to a scam which devalued the currency. As of yet, it’s not clear what’s causing this current devaluation.
However, it is clear to many observers that this new BitCoin currency just doesn’t have the gold backing of most currencies, nor does it have the public trust required for the value to remain constant.
The BitCoin setup has been carefully managed to avoid hyperinflation, but this will never stop the currency being devalued the instant the public loses confidence in the BitCoin’s worth. Some say it’s a form of fiat money – and in many respects it’s exactly that. BitCoin enthusiasts and pedants would claim this is untrue, but the similarities are clearly there to be seen.
Should We Use BitCoin?
There are a number of great reasons to support an anonymous, peer-to-peer traded currency rather than our regular banking, but the questions still linger: Is it safe? Is it a scam? Will it suddenly devalue out of existence? Is BitCoin mining worth it when you factor in power costs? Given that risks have been identified, is it worth investing in this currency?
Let’s pass this debate over to the readers. Do you use BitCoin? What do you see as the biggest risks of the system? What could BitCoin do to make the system easier for first-time users? Do you think governments will try to stop BitCoin use? What do you think will happen to BitCoins over the next 5 years? Do you have confidence in the value of the BitCoin? Why or why not?
And look out soon for MakeUseOf’s official manual on BitCoin, including how to set up an account, getting free Bitcoins, mining, and more.