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Bitcoin, its competitors and uses: Is this crypto-currency an alternative to World currencies?

Bitcoin, its competitors and uses: Is this crypto-currency an alternative to World currencies?

Last updated on: April 15, 2013 at 1:13 pm by Desh Kapoor

Bitcoin, its competitors and uses: Is this crypto-currency an alternative to World currencies? 2013-04-15T13:13:27-05:00 Desh Kapoor

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Bitcoin is a cryto-currency – not a real currency, but acting as one. It is the new rage these days.

Bitcoin (BTC) is an online commodity that is based on an open-source, peer-to-peer encryption protocol first described in 2009 by a pseudonymous developer (or developers) Satoshi Nakamoto

Its market is considered to be around $1-2 bn depending on the valuation. But there are competitors to Bitcoin already and their market is picking up as well.

Some of these competing currencies already represent significant stores of value. The value of a single bitcoin on the most popular exchange was $93.70 at time of publication, and the total value of all bitcoins in circulation just more than $1 billion (it was more than $2 billion at the market’s high point last week). The largest alternative cryptocurrency, litecoins, were worth $2.31 each and $38 million in total; the next largest, PPCoin, were worth $0.22 each adding up to a total value of $4 million.

Bitcoin is based on mathematical techniques that control the production of new bitcoins, make it possible for a person to verify money sent to them is genuine, rule out counterfeiting, and limit the maximum number that can ever exist (to 21 million).

How does the Bitcoin – crypto-currency work?

Based on digital signatures, payments are made to bitcoin “addresses” or “public keys”: human-readable strings of numbers and letters around 33 characters in length, always beginning with the digit 1 or 3, as in the example of 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W.

Users obtain new bitcoin addresses as necessary; these are stored in a wallet file with links to cryptographic passwords or “private keys” that enable access to and transfer of bitcoins. A file or “wallet” containing bitcoin addresses is usually encrypted with an additional password.

Initially, when it started Bitcoin had lots of challenges of illegal activities. And, the critics of Bitcoin trashed it on that score. But things are picking up in that area now, as more and more companies have entered to provide security and block illegal activities in this area.

While there might have been issues with illegal activities in the early days of Bitcoin, the market has changed dramatically in the past several months. For example Bitpay, a company that enables legitimate merchants to accept bitcoin as a form of payment now serves more than 10,000 merchants (an increase of 10x in the past 6 months) and is processing more in transaction volume than the infamous Silk Road marketplace. In addition, at least three of the leading U.S. bitcoin startups have demonstrated their commitment to preventing illicit activity by registering with the financial crimes enforcement network agency of the federal government and strictly adhering to the same anti-money-laundering processes followed by major U.S. banks. Lastly, several of these bitcoin companies have raised capital from leading venture capital firms, which not only provides credentialing but will allow them to invest in areas of infrastructure, compliance and customer awareness. Bitcoin is rapidly becoming a legitimate online currency alternative.

Will Bitcoin be able to do more than what Euro had hoped to do? It is still early days, but who knows? Let us just hope that Bitcoiners aren’t plagues by the ghost of Muhammad bin Tughlaq, the Wise fool!

Related articles from External Sources

Financial Crimes Enforcement Network

Money Laundering

Peer-to-peer

Silk Road

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