Is Bitcoin a Real Currency?

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For the last five years, bitcoin has been in the news—with widely varying reports. Bitcoin is essentially a new type of currency that was initially created and introduced by an anonymous person, one using an alias of Satoshi Nakamoto. The anonymity of the developer only adds to the mystery of the currency, as many have tried to understand how it works and whether or not it is even a real thing.

Anonymity at All Times

For those using bitcoin, purchases can be made anonymously, or that is what is intended. Critics would argue that nothing that takes place over the internet is truly anonymous, but this is at least the intention of using bitcoin. When making a purchase with bitcoin, you do not need to provide your name or any other identifying information. International transactions are simple, as bitcoin is a global currency, one that does not rely in any way on exchange rates. This means that you are less likely to ever pay any international transaction fees, something that is attractive to those doing business on a global scale. The transactions are recorded in a public log, but there is never any identifying information other than the wallet number of the owner of the bitcoin or the recipient. Wallet numbers are difficult, but not necessarily impossible for experts, to trace.

Critics will also point out that because of the anonymous nature of bitcoin, it can more easily be used for illicit activity, such as buying drugs or conducting other illegal business online. With no monitoring, and because it is so difficult to trace purchases made with bitcoin, this concern may be a reality.

No Banks as Middlemen

When you use credit cards or debit cards to make a transaction, the banks serve as a sort of “middle man” in the transaction. This is usually why you are charged transaction fees for certain purchases or types of purchases. When you use bitcoin, the purchase is transacted directly between the two parties, whether it is an exchange between two individuals or an individual and a business. The bitcoin is merely exchanged between accounts directly, with no time needed for transactions to clear. When one person has a balance in their bitcoin account, it can be used to exchange for goods and services with anyone else having a bitcoin account.

Merchants are slowly but surely warming to the idea of bitcoin transactions, because there are no fees involved. Instead of paying a 3% fee, or even more, merchants keep all of that money. In many cases, this savings can be passed down to the consumers.

Are They Real?

Bitcoins are not little coins that you can hold and feel. It is a type of currency that exists only in an online “wallet” which is your account. You can only use them to complete transactions with others who are using the same currency system, as those without an online wallet will be unable to use bitcoin at all. Because bitcoins only exist in a virtual world, they are not insured at all by the FDIC. Should your account be hacked or you lose your computer or lose access to your online account, you are at risk for losing all of your bitcoin. The reality is, servers can be hacked or viruses could eliminate your online wallet. You could also accidentally delete them yourself, and be unable to recover your bitcoin under these types of circumstances.

How Can I Acquire Some?

There are several ways that you can acquire bitcoin currency and begin an account. There are some online sources for using other types of currency (USD, CAD, or any other country’s currency) to purchase bitcoin and start an account. A few of the most popular places to purchase bitcoin are Coinbase.com and CoinMkt. Other ways of acquiring bitcoin include certain mining tasks, like completing complicated puzzles and being rewarded. You might even be playing certain online games that allow you to acquire “points” that can be used in a rewards marketplace. This is a version of bitcoin that you are acquiring, even though you may not intentionally be trying to build up a bitcoin account.

Some people are trying to build up bitcoin accounts to see how they can use this currency to make purchases, others may be purchasing bitcoin as a form of investment, since the future of bitcoin is unknown but it could be something that rises significantly in value, particularly since many of the world’s currencies are fluctuating wildly.

Caution is Warranted!

As with any financial transaction, you need to be very careful about who you are dealing with. Never send money or wire money to someone who you cannot verify in some way. Bitcoin is a real currency, but, since it is not regulated by any government or agency, there is plenty of room for fraud and you need to protect yourself adequately.

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