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article imageOp-Ed: Are Bitcoins and other crypto-currencies a viable option?

By Kimberly Reynolds     Jan 15, 2014 in Business
Many people are interested in Bitcoin and other crypto-currencies these days, but the debate on whether these virtual currencies will last is still ongoing.
Global financial transactions are commonplace. While making a sale might be easy, getting money from one country to the next is less simple. Mailing cash isn't exactly secure and, on one end of the transaction or the other, someone has to exchange one currency for another. Most banks don't operate internationally and can take days to transfer money across borders.
Argument For Online Currency
A currency that exists purely online avoids the issues that slow down international transactions: if you can spend the same currency with businesses in each country, you can avoid not only the hassles of exchanging money, but also the cost of doing so.
Crypto-currencies, such as Bitcoin, rely on cryptographic systems to create and manage money that exists only on computers. It can feel a little unreal to spend a digital currency for a physical product, but that's because the concept is relatively new. Showing a piece of plastic or trading sheets of paper for those same goods is the same process as trading electrons, at the most basic level. In fact, electrons can actually be more effective, because they can be more secure than those pieces of paper or plastic. Because of the cryptographic principles involved, it takes a lot more expertise to steal a Bitcoin than to grab someone's wallet.
A Return To Privacy
There's also an added element of privacy to transactions with crypto-currencies, at least in the way that the underlying concept has been implemented in Bitcoin. With a credit card, it's very easy for a government to get access to your spending history, as well as advertising companies and anyone else the credit card issuer chooses to provide information to. Cash is easier to deal with, but the government that issues a particular currency can create any number of laws about how it should be handled and tracked. Because a crypto-currency isn't controlled by a single government or processed through a single company, you're guaranteed a higher level of privacy.
The right to privacy in your financial transactions is no small thing. In tightly controlled regimes, where possession of certain books is forbidden or contributing money to certain organizations is against the law, being able to spend money freely without the concern that someone looking at your bank account will be able to put you in jail may very well be a matter of life and death.
There's a real need for crypto-currencies in today's global economy. Bitcoin has only demonstrated a fraction of the benefits of using such a currency; it has yet to be adopted by mainstream audiences and, until it is, users have only exercised part of its potential. However, the number of tools and other options for using Bitcoin is growing quickly, making it a viable currency.
While it's not yet stable enough to use as a primary currency, you may find that you can start using a digital currency for some of your purchases. In fact, online retailers like Overstock.com are making it easier to do just that. Recently, Overstock.com made headlines when they opted to accept payment in Bitcoins.
Can a Virtual Currency Be Real?
Many people are interested in Bitcoin and other crypto currencies these days, but the debate on whether these virtual currencies will last is still ongoing. While there are many people in Silicon Valley who believe this could be the next technology that completely changes the world, the reality is that the men and women on Wall Street are still looking at it with skeptical eyes. After all, this definitely seems like a currency that isn't backed by anything at all. How can something have real value if it doesn't even exist in the real world? Let's take a closer look at what really gives Bitcoin its value.
A Service Backed Currency
Most people are familiar with currencies that are backed by some type of commodity, such as gold or silver, but governments around the world have not used this form of money for quite some time. The United States Dollar is the main currency used around the world, and the reality is that there is no gold or silver in the vaults backing up the paper. The case is the same when it comes to the dollar's main competitors, such as the Euro or Yuan. Although most people think that Bitcoin is just another currency that is backed by nothing, the fact of the matter is that there is something that gives this currency "intrinsic value".
Bitcoins are backed by the payment service known as the Bitcoin protocol. The protocol is basically competing against Western Union, PayPal, Visa, and other payment options in the world today, and it has many advantages over the rest of the industry. While the current generation of payment processors charge fees between 3 and 10 percent of each transaction, transactions on the Bitcoin network are almost free of charge.
These transactions also have the potential to be anonymous, as you don't have to turn over all of your personal information when you want to send someone a payment over the Internet. The advantages of Bitcoin as a payment network are obvious, but the catch is that bitcoins are the only currency that can work on this network. In other words, people have to purchase bitcoins if they want to be able to use what is arguably the best payment network.
Future Currencies Backed by Services
It becomes easier to see why bitcoins have value when you look at the other services that can use the technology behind Bitcoin to create decentralized autonomous corporations. For example, people will soon be able to place a bet with anyone in the world instantly through a protocol that is being built on top of Bitcoin. Instead of using a service such as Betfair where they basically act as a centralized middleman, bettors will be able to connect directly with other bettors to wager money on anything from sports matches to the stock market.
Summary
As more businesses adopt Bitcoin and other crypto currencies, the demand for alternative currency system will rise. The technology behind the Bitcoin protocol will be used to replace many different centralized services on the Internet today, and the Bitcoin payment system is just the first of many new decentralized services to come.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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