When I was a little boy my parents use to bribe, er incentivize, me to do certain things by offering pennies, nickels, and dimes. I was always fascinated with the dime, because it was obviously smaller than the nickel, but it could buy twice as much candy. How was that even possible? Soon, though, I learned about paper money and I was off and running with an encyclopedic knowledge of how money worked. That is, until recently. Suddenly, there is a new kind of money out there, and it has nothing to do with “In God We Trust” or that funky eye looking out at me. Today, Gildshire’s Business Magazine dives into Bitcoin. What is it? Is it here to stay? What does it mean to me?
Bitcoin was born in 2009, as a response to the Great Banking Crisis of 2008. Why, said the founders, should we be beholden to institutions that care so little for our well-being? Why not bypass the Wells Fargos of the world and create our own currency?
The knee-jerk reaction to such a thing was incredulity, but we know now not to scoff at tech just because we don’t understand it. A prominent publication predicted in 1995 that the internet would fail. Another predicted a decade ago that the iPhone would never sell. With those caveats in mind, let’s dig into Bitcoin.
What is it? Bitcoin is a virtual currency mined from computer interfaces. Seven or eight years ago you could mine the stuff for yourself if your computer was powerful enough, but that is no longer possible. Now you must use bitcoin mining hardware. Amazon sells it.
Is it even real? Those who think bitcoin can’t be used to buy anything real are either stuck in the past or just spreading misinformation. Many independent businesses accept bitcoin, but even some big brands are getting in on the act, including a Pennsylvania Subway restaurant and, wait for it, software giant Microsoft!
How do I get some? Finding a bitcoin exchange near you is as easy as a simple internet search. The results will even tell you where to find an ATM through which you can purchase some with cash.
Are there advantages to using this stuff rather than cash? Actually, yes. Bitcoin transactions take place instantly (or nearly so) while transfer and placement time varies with traditional money. What do we mean? Raise your hands if you have had to wait to see a payment ‘posted.”
Is this something I should consider as part of my investment strategy? Maybe, because some pretty powerful people are getting in on the action. Perhaps you have heard of Bill Gates and Mark Cuban.
Let me grab my debit card! Whoa there, sport. The bitcoin market is the Wild West right now. The speculative roller coaster makes foreign currency seem stable by comparison. Remember, there are plenty of stocks (like Twitter) that are innovative and have staying power … but have still lost investors a bundle. Don’t confuse the potential utility of bitcoin with a guarantee that its value needs to rise. Further, adding to the volatility is the fact that there’s no guarantee that bitcoin will succeed. The cryptocurrency community is fractured about where to go from here. It just saw a splinter group create a competing cryptocurrency known as Bitcoin Cash.
Bitcoin was first, so they will come out on top. Blackberry was first, too.
Oof, you’re right. Maybe I will lay out. That’s probably prudent, but the whole thing deserves our continued attention. Techies are excited about the prospects of cryptocurrency in general, and even bitcoin in particular. However, everyone admits the currency is an infant. That said, merchants are learning the potential of transacting with bitcoin. The sooner that happens the sooner individual consumers will become comfortable with digital currencies. Right now, the learning curve is encouraging. When you look at the amazing strides in e-commerce over the past 15 years, such as the Big Mac you “Masterpassed” at lunch today, it’s awfully hard to write this off.
So, wait and see, but ignore it at my peril? You’ve learned so much since we have been together. Bitcoin may turn out the next PIN number. It may, though, be the next Google Glass. What a mess that turned out to be.