16 September 2011

Bitcoin is a digital peer to peer currency. I’m not going to write too much about it because I haven’t tried it myself yet but it’s a really interesting concept. It is in effect the digital equivalent of gold.

Like gold, the value of a bitcoin is intrinsic; it isn’t backed by anything. Using an algorithm that constantly becomes more difficult to perform, the amount of bitcoins in existence increase at a controlled rate.

They are anonymous and peer to peer - you can send bitcoins to anyone in the world securely and without the need for a third party. The peer to peer network itself takes care of authenticating and managing the transfer to prevent fraud and so forth.

There are also exchanges around where bitcoins can be traded for “real” money such as USD. This opens up a lot of interesting opportunities and I can see how such a system could work. The network isn’t going to deliberately corrupt itself as the people forming the network are the people that want it to be safe. A really novel idea… Could it be the currency of the future? :)

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