Bitcoins are alternative currency but primarily an e-cash payment system.
The first internet digital transaction payment method to be significant was PAYPAL. Most people’s reaction to it was that they would never pay for anything on the internet, and the agencies that controlled the money supply and credit cards were very dubious of such operations. Wind the tape on ten years and Amazon and the vast majority of on-line retailers and service providers accept digital cash transfers and the leader is Paypal, which was eventually bought by Ebay. ClickBank is a variation, with similarities.
Today’s world of online retailing and electronic payment systems could not have flourished without systems like Paypal but it would have been much more slow to introduce it if left to the banks (card issuers) who were entirely happy with the methods of scalping exorbitant fees to enable such processes. With Ebay controlling Paypal who can say that it is not operated in the interest of its owners and not so for its users, other than convenience but no real alternative giving the payees themselves some independence and control. That is until the birth of Bitcoins.
Adoption of Bitcoins is only a matter of time, but it needs greater acceptance before on-line and physical retailing and services and bill payments will be made with Bitcoins: this can be predicted, because when a sufficient number of people wake up to the advantages of doing so then large numbers of people will demand this option when they really do appreciate the advantages that Alt-Currency provides. Of course this prediction has no timeline attached to it as currently we are in the embryonic phases of this process: Paypal took ten years before it was widely accepted, but things are moving faster these days. However Bitcoins are very volatile in their valuation and until this settles down large scale adoption is unlikely. Interestingly its only at this stage that risk taking early adopters, investors and platform and service proposers can make bets upon the uptake and thus gain huge advantages. Bitcoins are bought and traded on exchanges, their value goes up and down and they are traded just like a foreign exchange market; like buying pounds or dollar trades against each other’s valuation. Initially Bitcoins are cryptographically mined to extract them by using computers to fire thousands upon thousands of cryptology numerical algorithms to chip away at the hidden numbers interface to reach a seem of correct number’s; a little like finding a seam of gold. Such mining operations sound complex but they aren’t, but do cost electricity charges for continuous running. (More details on mining see Mining Operations).
The first Bitcoins were invented by a Japanese guy; Satoshi Nakamoto, some say it was a group with this name simply as an identifier. Whatever the genesis, Bitcoins came into being as a very secure crypto-currency and a proposed alternative to ordinary currencies, credit systems and on-line payment options like Paypal: which are all based upon paper or printed money (Fiat Currency). These currencies have their failings; with the biggest being that the issuing bodies; banks and government’s can control the money supply, just by printing it. This is inflationary (QE even more so) and has in the past always resulted in eventual collapse. Bitcoins have an inherent rarity quality (like gold) and have to be mined. This operation is a modern digital operation based upon widely dispersed and independently owned computers using Peer to Peer (P2P) cryptographic operations. This means that no one is in control. The cryptography cannot be breached. The network runs over but is independent from the internet. Miners who hit a correct block of Bitcoins, which are unique crypto-coded results, obtain them without cost nor with any controlling issuer, but do incur electricity charges for long-term running. Early Bitcoin miners have and do stand to gain significantly from their efforts. This is the method for obtaining, circulating and interchanging the Bitcoins.
Bitcoins are best to be held within a secure digital code inside a cryptographic wallet, that should be put onto a USB or other offline storage ‘safe’ methods.
As the initial Bitcoins gathered acceptance and momentum, others adopted the code, some adding extra value options and security etc. So currently we have the emergence of many Bitcoin alternatives and clones. The early starters Bitcoin and Litecoin have right now much higher exchange valuations than the rest. But who can predict the winners. Will one single Bitcoin become the Amazon of the market, or will multiples flourish, especially those related to special interest groupings or national alliances?
The Bitcoin runners and riders Alt-Currency clones: