|"bitcoin" photo taken by Steve Garfield|
is licensed under CC BY-SA 2.0
What are some of the advantages of a bitcoin?:
- Lower transaction fees for merchants who accept credit cards. Typically, merchants get charged fees of around 3-4% of the total sale price, with bitcoin it is between 0-1%.
- Bitcoin is not backed by any government, so technically more coins should not be carelessly created to devalue the currency. Additionally, one particular government's instability won't hurt the value.
- It is easy to transfer money between people and you can bypass the banking system. You can just log into your bitcoin wallet on the internet or on your phone, and send a payment to another person's wallet.
- Strong international appeal of the currency. Bitcoin currency is slowly starting to be used in multiple countries throughout the world.
- Bitcoin payments are secure, irreversible and said to reduce fraudulent transactions.
- Payments can be made somewhat anonymously, which can bring about shady business. There recently was a big FBI bust on an internet company called Silk Road that was using bitcoins to sell drugs.
- Volatile and erratic currency pricing since it is a new currency.
- Fear of your bitcoin being hacked or stolen since they are all virtual.
- It costs you money to purchase a bitcoin. It looks like the average rate for buying a bitcoin is about 1% of the purchase price.
Another positive note is that bitcoin has some large companies that are now accepting them. The two largest companies are Overstock.com and the app game maker Zynga. Additionally, bitcoin has some strong backing and venture capital funding within the tech community.
With that being said, I think this virtual currency is a very interesting idea. I like the fact that the amount of bitcoins outstanding is limited and that they may become a worldwide type of currency. If this sounds a little weird to you, remember what it was like when you first heard about the internet (I was totally lost!). Only time will tell what is going to happen with bitcoin. Will it be more valuable than gold or just another fools gold?