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Is “Bitcoin” The New Digital Gold?

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For years conspiracy theorists have been talking about a one-world currency or a basket of currencies to replace the dollar as the reserve currency of the world. The obviously problem with that is which currency is stable enough to replace the dollar and if a basket of currencies is used which ones?

What are Bitcoin’s & How Do They Work?

The conspiracy folk’s dreams may have been answered with bitcoin. It has a lot of positives they will surely like. Satoshi Nakamoto created the bitcoin as a decentralized digital currency in 2009. The part that the anti-bank crowd will like is the elimination of a central banking system for the bitcoin to flow through. Bitcoins can be exchanged through computers or smart phones, locally or internationally, and without ever touching a banker’s greedy hands.

Bitcoin Value

Bitcoin value fluxuates much like the dollar on the open market as the demand ebbs and flows. When used for trading for goods and services, one bitcoin is divided into 100 million smaller units named satoshis — after the creator.

Bitcoins don’t flow through banks or organizations as I said before, but that doesn’t mean they float in space either.

Bitcoins rely on an internet peer-to-peer network. The “bitcoin” money is covered to electronic transactions and given to “bitcoin miners” that are simply high-speed computer servers. These servers confirm your transactions and record them in a decentralized, archived log approximately every 10 minutes.

Where they go from there is way too complicated to write in this somewhat limited space but here is a link to “Everything You Ever Wanted to Know About Bitcoins.”

Could Bitcoins Be the Next Dot Com Bubble?

By 2011 bitcoins were selling for less than $1.00 each. Fast forward to 2013 and the price is up to $20. As Japan and Russia begin to take notice the price soars to $147 by last Wednesday. As of Thursday, the price had settled at $130 in spite of cyber attacks and hacking of some of the selling sites.

There are several concerns that go along with hard to track currencies. On the surface bitcoins could be very attractive to criminals that are doing money laundering, or drug sales. Other considerations could be hackers, inflated fees, predatory sales to the inexperienced, and sites impersonating legitimate ones.

Some Final Thoughts

This just might be the latest computer gimmick for the smart phone or tablet owner to play with. But, there is the consideration that they have already amassed $1.4 billion in bitcoins — at least on paper.

On the positive side, since there is no centralized bank there is no way for regulators to find a location to shut down. There are also no economic forces or governments that can impact bitcoins.

What’s the downside? — Protection of your assets. With banks there is a $250.000 FDIC protection of each depositors account. Not such guarantee exists with bitcoins so your money is at risk if a hacker happens to break in.

On the surface bitcoins might be your way to “stick it to the banks.” And you might think that if $1.4 billion is already there — it must be safe. Money management is never easy.  The world is changing. New ways of making money are always going to surface. Be wise with where you put your hard earned assets.

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