Friday, April 19, 2013

Bitcoin: What the heck is it?!?

Posted By on Fri, Apr 19, 2013 at 7:35 AM

Every so often a new technology comes into the public eye that has everyone going ... "Huh?" This time around, it's the cryptocurrency Bitcoin, which is being accepted by an ever-growing number of vendors and sellers like most recently and notably, OKCupid. What's a cryptocurrency, you ask? Here's a general overview:
Once you download and run the Bitcoin client software, it connects over the Internet to the decentralized network of all Bitcoin users and also generates a pair of unique, mathematically linked keys, which you'll need to exchange bitcoins with any other client. One key is private and kept hidden on your computer. The other is public and a version of it dubbed a Bitcoin address is given to other people so they can send you bitcoins. Crucially, it is practically impossible - even with the most powerful supercomputer - to work out someone's private key from their public key. This prevents anyone from impersonating you. Your public and private keys are stored in a file that can be transferred to another computer, for example if you upgrade. A Bitcoin address looks something like this: 15VjRaDX9zpbA8LVnbrCAFzrVzN7ixHNsC. Stores that accept bitcoins - for example, this one, selling alpaca socks - provide you with their address so you can pay for goods. Source: What Bitcoin is and why it matters

Since the U.S. Dollar is not gold backed, this means our dollars these days are essentially just credits we move back and forth between each other with implied value for said credits. While this isn't entirely how a Bitcoin or other cryptocurrency works, it is a method of payment credit being accepted for implied value, just like any other currency. It differs in that it's not regulated by any government (but is allegedly implicitly more secure because there's a global transaction register.) Basically, it's a peer-to-peer (P2P) PGP key for your monies. It's a lot more complicated than that, and it's worth reading up on, but the concepts of cryptographic privacy and security are the same. Here are the basics on PGP:

Pretty Good Privacy (PGP) is a data encryption and decryption computer program that provides cryptographic privacy and authentication for data communication. PGP is often used for signing, encrypting and decrypting texts, e-mails, files, directories and whole disk partitions to increase the security of e-mail communications. Source: Wikipedia


People are certainly buying and selling Bitcoins in Charlotte, too. Are you? What are your thoughts? Is this a dangerous new technology or the wave of the future?

For more commentary, follow me on Twitter @dbirdy, for more photos peep my Flickr and to see all videos, subscribe to my YouTube channel here!


Article image credit: Branko Collin

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