By Emily Smith van Beek
In 1998, a ‘crypto currency’ was invented: the Bitcoin. Since July 2011 the Bitcoin empire has garnered a lot of media attention. Each day, over 1 million USD, via 40,000 transactions are sent and processed. Critics are calling it a currency of the future. It is an online only form of currency, independent of governments, banks or international organizations. Instead, peer-to-peer networks dispense and monitor coins and exchange them for money. It’s being coined (pun intended) as a ‘truly democratic currency’. As many of the world economies are crumbling, people are looking for a safe substitute for their savings, free of corruption and inflation.
The Bitcoin works by sending coins across the Internet. Transactions are broadcast within seconds and verified within 10-60 minutes. Most transactions are free of charges. As this is an emerging and underground currency, there is a lack of widespread use. Some online companies will accept bitcoins as a method of payment, but you can’t really use them in the real world.
Clients are becoming accustomed to using the Bitcoin store. Here, you can buy tech products. Bitcoin slashes off the price of the interest of what you might pay if you used a credit card and instead transfers that interest rate into savings. The products themselves are already at a reduced rate and the savings is an additional incentive to use the Bitcoin store.
Financial analysts are looking specifically to countries like Cyprus as prime examples of people shifting to this new online monetary system. The economy there has completely collapsed. The Cyprian government is trying to save their economy by taxing individuals with savings greater than 100,000 Euros. It is mass corruption and exploitation of personal savings, whereby 22.5% of the balance in accounts over 100,000 will be placed into funds earning no interest and may be confiscated. Why should peoples hard earned money have the right to be confiscated just because their governments couldn’t balance the books? Is the Bitcoin currency a better and safer option for these individuals?
It’s said this new currency is 40 years ahead of commercial banking. But is it sustainable? While a great idea in theory, there seems to be a lot of problems that need to be hashed out before the Bitcoin can go completely mainstream.
First, the rates are not stable. One minute the value was at $17 USD/ coin and dropped to pennies in minutes. Currently the value is high, sitting at $30 USD/coin. Each purchase and transaction is anonymous. Since no governments or international agencies are monitoring this new currency, there can be a lot of money laundering involved. Already the site has seen coins being used for drug and weapons purchasing, and I assume other such items as well.
As often as it may be hard to trust your government, I think it’s even harder to trust something you don’t even know the creator of. It’s said that the Bitcoin industry will drive traditional banking out of business, but for now I’ll keep my TD account open.
What do you think?