Hess Associates

What is Bitcoin – What Are Bitcoins?

If you are confused about what Bitcoin is/ bitcoins are, you are not alone. What they are not is a way of converting all your heavy pocket change into a little digital card by depositing coins into a corner machine and increasing the credit on your little card. You will still have to put your coins into machines such as the free excellent machines at some TD Canada Trust bank branches (or other such machines) or roll them up in the old-fashioned way. However at the end of this article, you will see how to do this with bills. Bear in mind that Bitcoin is the technology, whereas bitcoins are the actual currency involved.

Bitcoin represent a form of payment, digital currency if you will, which works online on a peer-to-peer network basis. These networks are exemplified by the earliest one – Napster (1999), where individual users were able to share music and files on a virtual network, not subject to any outside restrictions. No central authority issues new money or tracks transactions. These tasks are managed collectively by the network.

“Bitcoins are electronic currency, otherwise known as cryptocurrency. They are a form of digital public money that is created by painstaking mathematical computations, and policed by millions of computer users.

Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were gold coins in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years. They can be traded or spent without a third party, so there is nothing like a credit card fee. Bitcoins are made through a very interesting self-limiting system called mining. It is self-limiting, because only 21 million total bitcoins will ever be allowed to exist, with approximately 10 million of Bitcoins already mined and in current circulation.” https://netforbeginners.about.com/od/b/fl/What-Are-Bitcoins-How-Do-Bitcoins-Work.htm

You can use bitcoins to pay friends, merchants, etc. The link below will tell you how to get started.
Also please watch the following video for a brief explanation.

The bitcoin value before early March was ~ $800 to $900. (Jan. 2014). Since there a fixed number of bitcoins, their value fluctuates on exchanges. How divisible are bitcoins? A bitcoin can be divided down to 8 decimal places. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts.

Toronto, ON has recently opeoned a Biotcoin ATM where people can turn physical cash into digital coins. When you input cash, the ATM determines how many bitcoins you can buy. Or vice versa.

UPDATE: Feb. 25, 2014

On March6, a Canadian bitcoin bank Flexcoin closed after hackers stole its digital currency, a loss of about $600,000. Over the past 3 years, of the 40 such banks set up, 18 have closed.
If you are interested in the total amount of $ in this digital currency, consult Coindesk.com.

However, according to David Olive, digital currency’s here to stay, whether it’s Bitcoin or something else (Toronto Star, March 8, 2014). Bitcoin is essentially the world’s first global currency, although presently unregulated. There are no transaction expenses, and the system is accessible anywhere on earth. Bitcoin is championed by:

1. Marc Andreessen, of Netscape fame,
2. The Winklevoss twins, re Facebook,
3. Robert Shiller, a Yale economist,
amongst others.

Update June 3, 2014

In a potential course correction, Apple is opening to the idea of letting iPhone users make payments with bitcoins and other alternate currencies.https://www.washingtonpost.com/blogs/the-switch/wp/2014/06/03/is-apple-finally-relaxing-its-stance-on-bitcoin-apps/?wprss=rss_technology&wpisrc=nl_tech

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