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Bitcoin

You may have heard about a new currency called Bitcoin. Taken on the surface, it’s just another way to transfer money between individuals except that this one isn’t controlled by any government. It’s as secure as cash (or probably more secure since it can’t be counterfeited) and while it’s not quite as anonymous as cash, it’s much more anonymous than credit cards or checks. Like most other currencies, the value is set by what people think it’s worth. One of the most popular Bitcoin Exchanges is called MtGox and it says that right now one Bitcoin is worth $120 USD. Bitcoins are almost infinitely dividable so you just pay for stuff in portions of a Bitcoin. More and more retailers are starting to accept Bitcoin as a direct payment option or you can just use it as an investment strategy and a way to transmit money between like-minded people. You can never actually hold one in your hand. It’s all handled digitally.

From the geeky math side, it is even more interesting. The project was launched in 2009 by someone who still remains anonymous. Bitcoins are found by solving an unpredictable cryptographic problem and the whole system is configured to only dole out a specific number of Bitcoins every year. There will only ever be 21 million Bitcoins and they get increasingly hard to find. These “miners” who find Bitcoins are also helping to cryptographically validate every Bitcoin transaction.

I haven’t listened to much of what the general media says about Bitcoin but I’ve heard random snippets trying to link it to terrorism, drugs and clubbing baby seals. That’s nonsense. What really scares people in charge is that no one is in charge of Bitcoin. Governments can’t print more of it or directly affect it’s value. There are many other crypto-currencies out there, but this is by far the most popular one.

It’s a remarkable system and I’ve only begun to scratch the surface with this post. If you’re interested in learning more, check out Leo Laporte’s interview with Gavin Andresen, the chief scientist at Bitcoin.