Is Bitcoin the Cryptocurrency of the Future?

Price fluctuations and inflation affect all of us to some degree. It’s hard to ignore the cost of milk, bread or meat slowly rising over the course of a year, or shrug off our delight at the gas pump, knowing we have saved a quarter or two.

But, can you imagine the excitement of finding out the value of a single dollar grew to $10.00 in just a few weeks?

And what goes up must come down right?

How about watching that single dollar that was valued at $10, take a beating and return to, well, its original value of a dollar?

The majority of us could not fathom dealing with such extreme volatility when we’re accustomed to relatively stable currencies, such as the US and Canadian Dollar, Euros, etc. However, if we’re talking about dealing with the latest digital currency trend leader, Bitcoin, these experiences would not be all that shocking.

What is Bitcoin?

Maybe you’ve seen the “B” logo on a website under payment options, or heard the term “Bitcoin” passed around in conversation as some new currency. It’s pretty easy to see that Bitcoin is electronic money, but beyond that, Bitcoin is shrouded in mystery.

Tell me more.

Bitcoin was invented in 2009 by a software developer, and his name is shrouded in mystery, too. The most important thing about Bitcoin is that it is decentralized. No one controls it. Banks do not control it. The feds are not part of it. Bitcoin is an asset confined to the digital world. You can’t print it, or hand it over to a shopkeeper. However, you can go online and exchange it for goods and services like any other currency.

Is it printed or manufactured?

Another fascinating aspect of Bitcoin is how it can be first retrieved. This currency is not physically created. It is only created digitally and this is known as mining or “mined.”

If you want to get your hands on some Bitcoin, you can get them in a few ways; some ways are easier than others.

How can I get Bitcoin?

You can pay for Bitcoins ranging from hard cash, credit cards, debit cards, wire transfers and even other cryptocurrencies (How Can I Buy Bitcoins? Coindesk.com).

But first, it’s recommended that you get yourself a digital wallet. Depending on the security level you want, a digital wallet will store your Bitcoins on the hard drive of your computer.

Why would I want to use Bitcoin? Here’s the good…

If you despise the traditional fees associated with accepting credit cards, this currency has quite a deal for you. Transaction fees associated with Bitcoin are paid by the purchaser – NOT the vendor – and even so, they are less than the standard rate that credit card processors charge. For a merchant, adding 1-2% back to the bottom line is an attractive proposition.

The transaction processes are also quick, convenient and secure for both the vendors and the merchants. As digital technology reliance increases around the globe, Bitcoin can be framed as a highly practical, international payment solution. In addition, every transaction associated with Bitcoin is recorded in a block chain, which is essentially a database that continues to grow and protect the data from being modified or removed.

Okay, here’s the bad, and the ugly…

That said, Bitcoin certainly comes with a handful of liabilities and criticisms. Perhaps the most notable is the extreme volatility, as illustrated earlier.

Bitcoin is a fiat currency and only retains its value as long as the public believes in it. Since it’s an unproven and highly speculative currency system, Bitcoin has been exposed to several bubbles and busts, and most likely hasn’t seen the last of either event.

A little enthusiasm can skyrocket the price, and a short period of panic in the market can send it crashing back down just as quickly. For this reason, merchants that do rely on Bitcoin exchanges are wise to frequently convert their payments back to a currency with more stability.

Since transactions are secure and hidden from the eyes of authorities and big banks, it’s not surprising that Bitcoin has also attracted a variety of criminal activity. Several acts of theft and black market exchanges have given the currency a rather shady reputation. To make matters worse, a man from McKinney, Texas was recently charged with operating a large scale Ponzi scheme that stole more than $150 million from Bitcoin investors. So, there you go.

Is there a turnaround in sight?

The value and enthusiasm for Bitcoin slowly drifted downward especially after the once-largest Bitcoin exchange, Mt. Gox, completely collapsed and filed for bankruptcy in 2014. This failure cost many Bitcoin holders dearly and left a black eye on the reputation of the entire currency system. But now, a surge of positive news and developments has emerged and Bitcoin shows signs of a longer sustained life yet again.

However, recently during the month of November 2015, Bitcoin has jumped between the mid-$300’s to low-$400’s; prices not seen since late 2014. What is primarily responsible for this turnaround? A recent poll by CoinDesk (considered a leader on digital currencies) asked Bitcoin enthusiasts for their thoughts and revealed the following:

• Nearly 50% of respondents believed the recent price movement was due to capital controls in China and a mixture of positive news stories being released.
• The drop in the stock market in China has especially influenced investors overseas to pursue other investments.
• A strong bull market for Bitcoin has now emerged in China, and new speculators continue to jump in and cheer Bitcoin on as the currency of the future.

Other good news has been steadily flowing in from around the world. The European Court of Justice recently ruled that Bitcoin transactions would be exempted from VAT (value added tax), making the virtual currency slightly more attractive.

Large financial firms in the United States are also starting to publicly admit their fascination with virtual currency systems. Although many of them are not planning to integrate directly with Bitcoin, speculators believe that any investment that encourages a faster adoption rate of virtual currency is anticipated to fuel consumer’s confidence in the first pioneer, Bitcoin.

Will Bitcoin rise to new heights?

At the moment, Bitcoin is still largely misunderstood by ordinary people, and everyday transactions continue to be dominated by credit cards.

The concept of Bitcoin continues to be praised as a faster and cheaper way to securely conduct transactions. Although the most recent news surrounding virtual currency has titled favor towards Bitcoin, the power in numbers has yet to be realized.

Could we eventually see a major shift from plastic to virtual currency? It’s certainly possible, but this transformation could be years, perhaps even decades away.

Sources:
http://www.coindesk.com/poll-48-percet-bitcoin-price-500-2016/
http://gadgets.ndtv.com/internet/news/value-of-bitcoin-surges-emerging-from-a-lull-in-interest-761863
http://www.theverge.com/2015/9/21/9367707/bitcoin-ponzi-scheme-operator-pleads-guilty