The Bitcoin - A Comprehensive Analysis
With so much attention surrounding the cryptocurrency, many people may be aware of the bitcoin revolution as it took hold of the Internet a few years ago. However, while they may have heard about how it spread and took hold, many are still not aware of how it works and what purpose it serves online.
To learn more about the bitcoin, refer to the infographic below created by Stetson University's Online Master of Accounting Degree:
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Understanding What Bitcoin Is
Many financial professionals believe that the bitcoin can best be understood as a unique type of ledger system. When their ownership changes hands, this transaction is recorded in the appropriate blocktrain for the bitcoins. These bitcoins are always online and are never physically transferred anywhere. Such information is always kept to date, so people are always aware of who the current owner of a batch of bitcoins is. Bitcoin mining is the process of computing those transactions, tracking them from operators all over the world without having any control on which individual or group has ownership of the currency. This concept of ownership has been likened to a very old currency on the Pacific Island of Yap. The people would trade ownership of giant rocks, and, while they were immovable, careful records recorded who had ownership at any time.
Bitcoins, much like any other such product, were created through a patenting process. Their idea was presented by three people: Neal Kin, Charles Bry, and Vladimir Oksman, who would later file an encryption patent that resulted in the birth of bitcoins. This occurred on August 15th, 2008, and, three days later, the bitcoin domain name was registered. Slowly, as more and more people took to the idea of bitcoins, there beginning to develop measurements and conversion systems that would allow them to be applicable in place of real currency for some exchanges. This culminates in the first real world transaction of bitcoins, where a user paid for a pizza for approximately ten thousand BTC.
Like any other product and currency, bitcoins have grown extensively in the last several years, and have followed a variety of interesting developments in their virtual use. In 2011, the bitcoin reached parity with the Euro and the United States Dollar. Later that year, over three hundred and seventy five dollars in bitcoins were stolen, and the first bitcoin conference was held in New York. Since such events there have been numerous heists and larceny attempts on bitcoins from larger collectives. With the potential for scams such as Ponzi schemes, and unregulated practices still occurring every day, there are still some problems that surround the practical use of bitcoins.
As this form of currency quickly became more and more popular, the United States began to look into regulating it. On January 26th, 2014, a United States federal judge ruled bitcoins are a legal form of currency. This meant that they would be subject to limitations and regulations, much like any other type of currency, in order to discourage fraudulent use. From that point, many more judicial and regulatory systems began to notice the bitcoin and advocate responsible regulation for it. The IRS issued a notice on March 25th of that same year that it will treat bitcoins just like any other type of currency in order to regulate it appropriately.
Potential Problems with Bitcoins
As had already occurred, there are many potential situations where bitcoins could be stolen or fraudulently spread. One of the primary concerns for bitcoins is the fact that they could be effortlessly used in illegal purchases on black markets around the world. Because of their encryption, they can allow for an anonymous degree of trading that would result in the sale of illegal goods and services. Because of the volatile nature of the currency, there is a lot of potential for personal loss as well. Many investors in bitcoins may experience significant losses and sudden drops in value as the currency continues to establish itself in the modern market.
The Future of Bitcoins
Due to the relative infancy of this type of currency, the future is very uncertain. While the current volatility is very large, and their value is tremendously unstable, many investors believe that eventually, bitcoins will even out in the future, and develop into a better-regulated form of currency. Many investors are optimistic about the future of bitcoins. They believe that even if bitcoins themselves fall through, they will have begun to pave the way for other types of cryptocurrencies, ones that may be significantly easier to use and trade. Market analysts continue to speculate wildly about the potential of this currency, and what affect it may have on future economies.