Bitcoin-What is All the Hype?

October 17, 2014 by Ed Becker

Bitcoins are a virtual currency that have been in use since 2009. They are touted as being virtually untraceable and anonymous, making them very appealing for online users. But they are also notorious for some illegal practices, like drug dealing. While the bitcoin network does protect a user’s privacy, the network is very transparent and not totally anonymous like cash transactions. They have become so widely used that the IRS has stepped in to get their share, which has caused the mainstream to start paying attention.

What exactly are bitcoin?

It is a system that enables payments with completely digital money. Basically, it is peer-to-peer driven without any authority to govern the system. It is internet cash. You purchase something from someone who accepts bitcoin payment. You transfer the bitcoin amount from your virtual wallet to their virtual wallet, with only a numerical code to identify the parties and their wallets.

Why have they become popular?

They have become popular because they are completely virtual, the transactions are easy and fast, and there are little to no fees involved in the transactions process. They also are safer for businesses because the transactions are final, prohibiting any chargebacks or disputes. They are safer for users in additional ways; there can be no identity theft and no credit card duplicate charges.

What can you do with them?

You can purchase anything from anyone that accepts this type of payment. Private, online transactions is where most of the use began, but now many brick and mortar businesses are accepting this type of payment as well.

How do you get them?

There are several opportunities to acquire Bitcoin, the most common being payment for goods or services. You also can opt to purchase Bitcoin from an exchange, and exchange them with someone close to you. Lastly, the least common method, is to mine for Bitcoins.
Who is accepting them and who is using them?

A growing number of businesses are accepting and using Bitcoins; restaurants, lawyers, apartment complexes and many online companies. As of last year Bitcoins in circulation were valued at $1.5 billion, with transactions totaling millions of dollars per day.
Are Bitcoins legal?

Bitcoin has not been made illegal by any legislation that is known of at this time. Some countries however, greatly restrict or ban foreign currencies or can limit the licensing of Bitcoin exchanges. Because Bitcoin is becoming so widely used many jurisdictions are beginning to provide rules and guidance on using the new currency.

Conclusion

This initial article about Bitcoin gives you the backbones of what they are and who and how they are being used. This is a new form of currency with definite potential for growth. The second part of this series will discuss how to legally and ethically deal with the recordkeeping and taxation of Bitcoin for users and businesses. For those of us who do online shopping and other transactions, Bitcoin is something to learn about now while it is still a young technology.