Kevin Sterne, Contributor
Even though the crypto currency, Bitcoin, isn’t exactly new, it still hasn’t infiltrated the mainstream ethos. But it’s getting there. You may have heard the term outside the fringe Internet message boards, or dark bar alleyways—that seemingly hacker-fancied geekdom thing that probably sprang from 4chan or Anonymous—but you probably didn’t understand it or, better yet, you probably didn’t want to. And who wouldn’t? What with most money and economic language so obscure and blathering it makes economists and Wall Street walkers seem like members of a secret money society or currency cult.
But unlike E.T.F.s, C.D.s, and countless other acronymic or esoteric financial concepts, this peer-to-peer, electronic payment system is worth investing understanding in because it has the potential to be the complete antithesis of politically-influenced banker bastardry.
By existing entirely in the online sphere and operating without crony governments and banks, Bitcoin has potential to reach efficiency beyond conventional forms of currency. Essentially, it allows for an economy void of regulators or special interest groups, creating a level playing field for all involved; the ultimate Libertarian currency.
The concept is as radical as it is simple: party A sends money to party B without party C. And yet, the abstract nature of all things economical typically furrows more than a few brows. So, to understand Bitcoin, it helps to understand fiat currency, or currency backed by government.
Rather than exchanging goods and services directly for goods and services we use currency. A one hundred dollar bill is just a piece of hard-to-create cotton the United States deemed worth of an arbitrary amount of goods and services. Credit cards and PayPal work as a metaphorical exchange of currency. People use them because governments tell them it’s okay.
Bitcoin’s transaction ledger is backed by a complex mathematical algorithm that everyone is privy to. Math wizzes call it fool proof. Banks call it scary.
With a typical cashless transaction (your mom’s credit card, PayPal, etc.), the business must absorb the cost of transferring money from your bank to their bank. This convoluted process, called an interchange, costs a percentage—usually 3% of the transaction value—and takes time—maybe days. Bitcoin cuts banks and interchanging out of the equation, reducing fees. This can be good for businesses and even consumers, who (in a perfect World, wherever that may be) benefit from lower prices.
The money saving potential goes far beyond fees and taxes. Bitcoin users may circumvent exchange rates between countries because governments have zero (or at least very little) clout over the currency. The cost of overseas transactions theoretically becomes non-existent.
As with any financial endeavor, Bitcoin is risky. It ceases to work if people don’t use it. The value has fluctuated from a few hundred to a thousand dollars, prompting some economists (suit and tie stock snobs) to call it volatile. But like the dot com boom of the ‘90s, many people are willing to jump without the assurance of a parachute. Popular online behemoths like Reddit and WordPress are natural fits for this financial innovation, but, surprisingly, a growing number of brick-and-mortar businesses (mostly mom and pop shops) are taking advantage of this growing phenomenon. You just won’t hear about BestBuy or Target (especially with their recent credit card fiasco/comedy) adopting this before Apple or Google finds a way to make it profitable at the expense of the middle class. And you can hedge your bets that they’re trying.
For now, the Bitcoin revolution hasn’t lost any steam. In fact, it hasn’t even reached novelty status. It’s like an obscure, fad that doesn’t become cool until a Kardashian dons it. Until that moment, it will obtain nothing greater than a cult following from hybrid hacker-hipster computer nerds or anyone else of fringe culture. On paper, it’s a revolutionary idea. Now we wait to see if the World can play fair with this innovation (they can’t).
Check Out How Easy it is to Get Started with Bitcoin, here…
About the Author
Kevin Sterne is a freelance writer, journalist, and editor. He’s currently working on a M.A. in Writing and Publishing at DePaul University. You can read more of his work at kevinsterne.com.
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