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Bitcoins — Virtual Money

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What you should know about virtual currency is that it’s both safe and risky — and, because it (or something like it) may become mainstream, you should know even more. Here’s a brief introduction:

What is virtual currency?
Virtual currency, aka, digital or cryptocurrency, is virtual money that acts as alternative currency and, usually, is transferred via the Internet. Presently, Bitcoin is the most recognized virtual-currency system. Some others are Litecoin, Peercoin and Primecoin, to coin some terms.
The tech/money gurus say just as digital technology and the Internet reinvented communication and business transactions, it may also reinvent world finance systems. In some ways, it already has, because banks and governments presently apply numerous web-based options for receiving, holding, transferring and distributing money.
Further, people, banks and governments constantly search for ways to spend less money (fees) on such transactions, and virtual currency may become one method.
Analysts say virtual currency could complement conventional financial networks. Bitcoin, a popular virtual-currency system, isn t a centralized entity. It’s literally a network of online users, worldwide; thus, it could become a dominant, future instrument.
The Bank of America says Bitcoin may emerge as a serious competitor to cash in e-commerce and digital-money transfers.

What are bitcoins?
Don’t think of bitcoins as coins. See them as virtual-currency certificates, similar to U.S. dollars in thought, but not form. As virtual currency, they have no form.
Bitcoin (the proper noun) describes the system; bitcoin (lower case) describes the currency.
Bitcoins function like any other currency, meaning, you can buy and sell items with them. A growing number of online and real-world merchants accept them as payment. The
See www.bitcoin.org/en/you-need-to-know.

Who owns Bitcoin?
No one owns the Bitcoin network. Bitcoin users around the world control it and, to work properly, it requires a complete consensus among all users and developers.
The Bitcoin protocol is an open-source, cryptographic system that operates on an international, peer-to-peer, file-sharing network that allows instant monetary transactions with little or no processing fees.
Think Linux.

Are bitcoins legal?
Not in every country, so you should check local laws first. However, bitcoins are legal In the U.S. and numerous other countries, but not China, of course. Also, know that virtual-currency systems are not presently regulated in the U.S., but businesses that exchange or issue virtual currency are required to conform to certain laws.
The U.S. Dept. of the Treasury’s Financial Crimes Enforcement Network (FinCen) recently intervened (cautioned) several virtual-currency exchange or issue firms. It has also issued a document providing interpretive guidance of the Bank Secrecy Act (BSA) for persons creating, exchanging and transmitting digital or virtual currencies. See http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

What determines a bitcoin’s value?
Supply and demand . The number of bitcoins units in circulation and the demand for the currency determines its value.

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How do you get bitcoins?
Visit www.bitcoin.org and create a Bitcoin “wallet,” i.e., a web-based program that you can use to hold — and accomplish — virtual bitcoin transactions. There, also, you can establish your 34- to 36-character Bitcoin Address, and log in.
You can also use a bitcoin exchange site — www.Intersango, for example.

Where do you store bitcoins?
Store your bitcoins in your virtual wallet, which you can access on a desktop, laptop or smartphone. Access the wallet to buy goods or services from anyone willing to accept bitcoins.
Record-keeping is via a networked, Bitcoin block-chain system that allows you to verify the validity of each transaction. A digital-signature system provides controls for bitcoins sent from your Bitcoin addresses.

Why use bitcoins?
The bitcoin website lists such benefits as no bank holidays, national borders or imposed limits. It says the Bitcoin system allows users to control their money. The site also lauds low fees, less risk (in transaction processes), security, control and transparency. Bitcoin transactions are also neutral, meaning, at this time, no corporation or nation has a horse in the race.
Disadvantages include limited acceptance, volatility and ongoing development. The website also says the system is not anonymous and doesn’t offer the same privacy level as cash.

What (and where) can you buy or sell with bitcoins
Amazon, CVS, Target, Victoria s Secret, Zappos, and Whole Foods, Overstock.com and a growing list of other retailers say they presently accept bitcoins. Proponents claim the list will grow exponentially over the next year. You need a Bitcoin mobile app to spend bitcoins in person. Some brick-and-mortar stores present a virtual-money QR graphic, to scan with your smartphone. This provides an access page that accepts your Bitcoin address and, subsequently, allows you to send the required number of bitcoins to the store.

Should your signshop accept bitcoins?
Not now, but maybe later. Currently, the bitcoin price can unpredictably rise or fall within minutes, If you do accept them, I suggest you convert them to dollars ASAP (see www.coinbase.com).

 

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