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bitcoin? do you trust your money?

March 11, 2013

Bitcoin.  Have you heard about the experimental crypto-currency?

For the rest of you who are wondering what that’s all about, here’s the gist of it.  In 2009, a bunch of computer programmers (or one guy, no one’s sure) designed an open-source peer-to-peer network that uses public and private key encryption to allow people to send Bitcoins to each other.  Due to the encryption standards used, and the public transaction records, its virtually impossible to double-spend bitcoins–which has always been one of the main problems with digital money.

Perhaps the most interesting thing about bitcoin is that there is no central authority controlling it.  The computer program that runs on all the client computers and establishes the network uses a mathematical algorithm to regulate the creation of new bitcoins, so its a deflationary currency.

Also, because relatively few people worldwide use it, the values at which bitcoin trades with traditional currencies can be quite volatile.  Recently one bitcoin has been trading for around $40 USD, but last November it was only around $9 USD, and in 2011 it had been up to $32, but then crashed all the way down to $2 or $3.  So yes, its experimental.

However, if you’re in the US, you may see Bitcoin reverse ATM machines coming to a convenience store near you, according to this article on CNET.  If you see one, and want so give me a gift, you can do so here: 1BVdZiPgPTvicma8Ut1AZEWYteadRWHPyF.  I haven’t bought any bitcoin myself–I’m still somewhat skeptical, but its an experiment I’m watching.

And it raises interesting questions about our money: who controls it, who can manipulate its value, and is it worth treasuring if its of fleeting value?

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