They are making the news at the moment, and while we see currencies around the world going up and down, Bitcoin it seems does nothing but increase in value, at least that's what we are told in the news, but what exactly are they? Let's take a look at, what they are, their origins and whether or not they have a future. Bitcoins are a digital currency that is based on an open source peer to peer internet protocol. What that means is that they are not tangible, you cannot hold a Bitcoin and there are non in general circulation. They are exchanged via a computer or smartphone and as it all happens peer to peer there is no banking establishment involved. Bitcoins are divided into 100 million smaller units and these are called satoshis after the man who invented them, Satoshi Nakamoto, and this is defined by 8 decimal points. They are exchanged between Bitcoin users or users and merchants that accept them by dedicated servers called bitcoin miners and the servers are updated every 10 minutes. It has become the most widely used alternative currency and the monetary base of Bitcoin as a whole is around the $1 billion mark. There has been plenty of criticism of Bitcoin as to whether or not it is in fact a legal currency and also the fact that it's value has fluctuated massively against the dollar.
A Brief History of Bitcoin
The 'crypto-currency came into existence with the release of the first open source Bitcoin client and the issuing of the first Bitcoins in 2009. Interestingly the initial price of the currency was not set by the creator, and as there are no banks or central authority involved, it was not them, it was actually by the users themselves. This was done on a forum and the most historic transaction to date was made, a 10,000 BTC Pizza. Soon after this the Mt.Gox Exchange was created. In 2011 Bitcoin started to become a little more widely used and indeed Wikileaks started to accept them as a donation currency. It did however later that year, suffer a massive crash in value and dropped from $30 to just $2 per Bitcoin, however the end of 2011 saw 1000 merchants accepting Bitcoins. There is of course a whole lot of technical issues behind the scenes that makes all of this possible, such as timestamps, transaction verification and of course much more.
Bitcoins state that there is now 1000 merchants that accept them. On the grand scale of things that's a very small percentage of the total of possible merchants. Will they be used for online gambling? Maybe, a few casinos and poker rooms have started to accept them but with the huge recent fluctuations then it's hard to see them catching on at the moment. No poker player wants their bankroll demolished by something so out of their control as a currency fluctuation. You can find out more about Bitcoin and online gambling here, but I think that Paul Krugman, the economist sums things up pretty nicely when he said, "[bitcoin] has fluctuated sharply, but overall it has soared. So buying into [bitcoin] has, at least so far, been a good investment. But does that make the experiment a success? Um, no. What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in [bitcoin]."
Many online poker players are now using Bitcoins when depositing and withdrawing at the US friendly online poker room Americas Cardroom. When depositing using the digital currency it is exchanged for USD for use at the tables.