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In Bitcoin We Trust?

By now you have probably heard of Bitcoin, but are you able to define it?

Frequently it is described as a non-government digital currency. Bitcoin is also sometimes called a cyber currency or, in a nod to its encrypted origins, a cryptocurrency. Those descriptions are accurate enough, but they miss out the point. It's like describing the U.S. dollar as a green little bit of paper with pictures on it.

I have my own, personal ways of describing Bitcoin and btc qr code. I think of it as store credit without the store. A prepaid phone without the phone. Precious metal without the metal. Legal tender for no debts, public or private, unless the party to whom it is tendered wishes to just accept it. A musical instrument backed by the total faith and credit only of its anonymous creators, in whom I, therefore, place no faith, and to whom I give no credit with the exception of ingenuity.

I wouldn't touch a bitcoin with a 10-foot USB cable. But a reasonable amount of people have, and many more soon may.

This is partly because entrepreneurs Cameron and Tyler Winklevoss, best known for their role in the origins of Facebook, are actually seeking to make use of their technological savvy, and money, to create bitcoin qr code to the mainstream.

The Winklevosses hope to begin an exchange-traded fund for bitcoins. An ETF will make Bitcoin more widely available to investors who lack the technological know-how to get the digital currency directly. By April, the Winklevosses are said to possess held around 1 percent of most existent bitcoins.

Created in 2009 by an anonymous cryptographer, Bitcoin operates on the premise that anything, even intangible components of the code can have value so long as enough people decide to deal with it as valuable. Bitcoins exist only as digital representations and are not pegged to any traditional currency.

Based on the Bitcoin website, "Bitcoin is made around the notion of a brand new kind of money that uses cryptography to manage its creation and transactions, as opposed to depending on central authorities." (1) New bitcoins are "mined" by users who solve computer algorithms to find out virtual coins. Bitcoins'purported creators have said that the greatest way to obtain bitcoins will be capped at 21 million.

While Bitcoin promotes itself as "a really secure and inexpensive way to take care of payments," (2) in fact, few businesses have made the proceed to accept bitcoins. Of the ones that have, a sizable number operate in the black market.

Bitcoins are traded anonymously within the Internet, without any participation on the part of established financial institutions. By 2012, sales of drugs and other black-market goods accounted for an estimated 20 percent of exchanges from bitcoins to the U.S. dollars on the main Bitcoin exchange called Mt. Gox. The Drug Enforcement Agency recently conducted its first-ever Bitcoin seizure, after reportedly tying a transaction on the anonymous Bitcoin-only marketplace Silk Road to the sale of prescription and illegal drugs.

Some Bitcoin users have suggested that the currency can serve as a way to avoid taxes. That may be true, but only in the sense that bitcoins aid illegal tax evasion, not in the sense that they really serve any role in genuine tax planning. Under federal tax law, no cash needs to alter hands in order for a taxable transaction to occur. Barter and other non-cash exchanges are still fully taxable. There's no reason that transactions involving bitcoins will be treated differently.

Outside of the criminal element, Bitcoin's main devotees are speculators, who've no intention of using bitcoins to buy anything. These investors are convinced that the limited way to obtain bitcoins will force their value to check out a continual upward trajectory.

Bitcoin has indeed seen some significant spikes in value. But it, in addition, has experienced major losses, including an 80 percent decline over 24 hours in April. From the beginning of the month, bitcoins were down seriously to around $90, from a lot of $266 prior to the April crash. They were trading near $97 earlier this week, based on mtgox.com.

The Winklevosses will make Bitcoin investing easier by allowing smaller-scale investors to profit, or lose, since the case might be, without the hassle of actually buying and storing the electronic coins. Despite claims of security, Bitcoin storage has proved problematic. In 2011, an attack on the Mt. Gox exchange forced it to temporarily power down and caused the price tag on bitcoins to briefly fall to nearly zero. Since Bitcoin transactions are all anonymous, there is little chance of tracking down the culprits if you suddenly find your electronic wallet empty. If the Winklevosses get regulatory approval, their ETF would help shield investors from the threat of individual theft. The ETF, however, would do nothing to handle the issue of volatility brought on by large-scale thefts elsewhere in the Bitcoin market.

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