By Allan Harris & Corey Conley
The concept of a global currency seems laughable, but here’s a new global currency called Bitcoin. Even Europe, with its thousands of years of shared heritage and culture, can’t all agree on the Euro, and their banking crisis seems unlikely to win over the doubters. You might be surprised to learn, then, that there already is a global currency. The humble “Bitcoin.”
In 2009 Satoshi Nakamoto created the decentralized digital currency, Bitcoin, and published a paper about his efforts. The paper describes, in great technical detail, how each Bitcoin is generated over the Internet by using a free application that is known as a Bitcoin Miner. The program grants each Bitcoin depending on a certain amount of work the user’s computer must complete – usually graphics and processor-intensive tasks – to earn the Bitcoin. It’s often referred to as “Bitcoin mining.”
A single Bitcoin can take a long time to mine, depending on the processing power you have available – a single, powerful computer might take several days, whereas a server farm or “pool” might generate one a day.
The whole process is similar to programs that allow users to volunteer their computer’s idle time to crunch on data for other organizations and people. While you’re away from the keyboard, these programs put your computer to work on tasks like folding proteins and analyzing telescope data. With Bitcoin, you get the Bitcoins your computer (or computer pool) generates.
If you generate a Bitcoin, it becomes a unique entity. Just like every dollar has a serial code, each Bitcoin is tracked and traded via an encrypted peer-to-peer process that anonymously tracks the path of each coin. Transactions are verified and permanently recorded by the Bitcoin network. These compiled histories are recorded as an open source, which means anyone can access the record. A host of (very complicated) protections keeps players from exploiting the system.
Bitcoin Taking Off
Among a computer savvy subset, the Bitcoin is catching on. Here’s why.
- Peer to Peer Transfer: Via the internet currency can be transferred from one user to another directly. You do not need a bank transfer or clearing house anymore.
- Low Fee: The fee for transfer is lower than those charged by banks and other financial institutions.
- Worldwide Access: You can use them anywhere and from anywhere in the world as long as you have internet access.
- No Account Freeze: Your accounts cannot be frozen with Bitcoin, this means no matter what happens to banks you will always have access to your money.
- No Requirements and Limits: you don’t have anything to worry about with regards to prerequisites and limits. The Bitcoin is for anyone who needs them.
- No Centralized Control: No one can raise or lower the value of the Bitcoin. Its value is determined by the aggregate of its users, not a central bank.
- Its value is rising: The Bitcoin is already paying dividends for early adopters, growing in magnitude of value.
- Privacy: all interactions are anonymous.
Final thoughts on Bitcoin
For these reasons, Bitcoin could be a digital gold rush. Already, some are blaming a shortage of high-end graphic cards – which convert energy to Bitcoins very efficiently – on the growing popularity of the digital currency. Such a system could be a boon to businesses who leave computers on at all times – why not harness that unused processing power for a bit of extra coin – Bitcoin. Because of the rules encoded within every Bitcoin, once 21 million are created, there will be no more Bitcoins produced. If it continues to grow in popularity and enters mainstream usage, it could prove to be extremely disruptive to current economic systems. Imagine people abandoning shaky “meatspace” dollars for decentralized “Bitcoin” in the same way people snatch up gold during tight times. Imagine the next wave of tycoons building wealth not from railroads, or innovation, or third-world sweatshop factories, but on acres and acres of server farms crunching data for Bitcoin mining.
You can find out more about Bitcoin mining by visiting Bitcoin.org. Another great Bitcoin resource is Mining.Bitcoin.CZ, it provides clear instructions about setting up your Bitcoin mining rig and helps you join a pool of other Bitcoin miners.