Bitcoin is the world’s most innovative digital currency. It uses a peer to peer payment system of digital currency which can be transferred privately and securely. It is referred to as crypto-currency because it uses cryptography to control the creation and transfers of money. You send payments by broadcasting digitally signed messages to the bitcoin network. These transactions are then verified and recorded into a shared public database called the block chain. Subsequently customers are rewarded with transaction fees and newly minted bitcoins.
(Bitcoin mining stack. Source…)
This block chain is integral to the bitcoin process. By having access to a public database with records of all transactions, the block chain is able to prevent the double-spending of bitcoins. The block chain is maintained by ‘miners’ who process payment, verify each transaction and record them to the block chain. Through this chain, bitcoins are bought and sold at a variable price based upon the current value of other currencies.
There are multiple options when it comes to accessing and storing bitcoins. You can have a digital bitcoin wallet which allows users to make and receive payments using bitcoin. These wallets are available in many formats, including apps for mobile phones and computers, hardware devices or paper tokens. The wallets store a public key, otherwise known as a bitcoin address and its associated private key.
These functions operate using public key cryptography, where a pair of cryptographic keys are generated of which one is public and the other private. The public key operates as an address to which payments are sent, whereas the private key functions as a safeguard because it must be presented when making a payment from an address.
Alternatively, there is the option of storing bitcoins physically by producing a private key and bitcoin address offline. Physical bitcoins hide the private key behind a tamper proof sticker and also contain a two-factor private key which requires a password in order for the bitcoins to be redeemed.
(A chain of block erupters used for Bitcoin mining is pictured at the Plug and Play Tech Center in Sunnyvale, California, October 28, 2013. More…)
There are multiple methods available through which you can transfer bitcoin, including online sites. These online trading sites enable you to buy or sell bitcoin immediately against current currency rates. Alternatively you can use ATM bitcoin machines, unique consoles which are beginning to be introduced worldwide. The first bitcoin ATM was introduced in Vancouver, Canada and uses a palm-scan security system to dispense hard money in exchange for the anonymous crypto-currency. Canadian firm Bitcoiniacs have currently bought five of these ATMs from Nevada based-producer Robocoin, heralding a new era of automated online currency.
(John Russell, co-founder of Robocoin, works out the kinks of what is being billed as the world’s first Bitcoin ATM at a coffee shop in Vancouver. More…)
These ATMs demonstrate the increased use of bitcoin. They are becoming increasingly popular with private businesses who seek to increase their profit margins. They are attracted by the lower transaction fees of bitcoins, which are much less than the current 2-3% fee for credit card processors. Thus vendors such as Virgin Galactic, Reddit and OkCupid have begun to accept bitcoin. Currently 30 brick and mortar businesses in Canada accept bitcoin as payment, a number which is set to increase as more ATMs are established across the nation. Moreover, after one month of operation, ATM transactions totalled 1 million Canadian dollars (US$942,000), illustrating the growing popularity of bitcoin as it brings digital currency into the real world.
(Bitcoin is an unregulated, uncontrolled online currency – worth more than £500m, it’s the world’s fastest growing. It can be used to buy drugs, move money across the world, or get rich quick. The people behind Bitcoin speak to the Guardian’s James Ball at their home in a squat in central London)
Bitcoin is becoming a worldwide phenomenon as Hong Kong has now been released as the second nation to introduce bitcoin ATMs. The virtual currency has attracted mass Chinese media attention and investors have helped dramatically drive up the price of bitcoin to above $1,000. Additionally, Robocoin have revealed plans to sell 50 other ATMS to operators worldwide.
However, this worldwide attention has also attracted scrutiny to the bitcoin process. Taiwan’s Central News Agency warned institutions against the extremely volatile price of bitcoin and the fact that:
Bitcoin is not real currency and banks cannot receive or provide it. Installing ATMs require the authorization of [Taiwan’s Financial Supervisory Commission (FSC)], but it will not be approved, thus it is ‘impossible’ for Bitcoin ATMs to enter or appear in Taiwan.
Robocoin remains fervent that bitcoin is an innovative new approach to online currency, and aims to work with worldwide operators in an effort to educate them about the vast potential of bitcoin. It remains to be seen how effective bitcoin will become and to what extent it replaces current tangible currency. However, in a society which is growing ever more technological, bitcoin seems to herald a new approach to online monetary transactions.
This article was produced by Bradley Taylor. Bradley is a motoring enthusiast who loves cars and everything automotive but also writes across a variety of topics.