You may have heard a lot in the news about Bitcoin recently: the “peer-to-peer” payment system, which operates outside any governmental regulation seems to have captured the public's imagination. WordPress and Reddit accept it. Fancy a trip to space? Virgin Galactic will take Bitcoin instead of credit cards. Even a Subway franchise has gotten into the craze for Bitcoin. Very recently, a single Bitcoin was being traded for over $1,000, making the cryptocurrency quite attractive to investors with an appetite for risk. But what is is?
What is Bitcoin?
According to Bitcoin’s website, “Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet.”
Essentially, Bitcoin is a new kind of currency that isn't regulated by any government. It's attracted a lot of attention by investors, law enforcement, and entrepreneurs.
How are new Bitcoins created?
The creation of Bitcoins is where things get interesting. New Bitcoins are generated through the process of "mining.” Nodes on the distributed network attempt to find the solution to a certain mathematical problem and are awarded Bitcoins each time they do.
How to Acquire Bitcoins
Acquiring Bitcoins is not as easy as just plunking down some cash. You can accept Bitcoins for goods and services or seek them out via Bitcoin Exchanges or an international digital wallet like Coinbase. You can also participate in a mining pool or invest in the hardware to "solo mine" Bitcoin.
Some individuals are investing time, money and resources in solving Bitcoin blocks, thereby creating more currency. And because the market is so new, speculative investors, with an appetite for risk, are seeing large returns in a volatile Bitcoin market.
Of course, there are plenty of pitfalls to Bitcoin. Chief among them – theft. Any money stored in an "electronic wallet" and not backed by an outside institution is susceptible to hackers and other malicious activities. Law enforcement dislikes Bitcoin because it is used in illegal sites like the Silk Road, and may become a potential route to money laundering.
While many love the idea of a "currency of the Internet," anonymous and unregulated, others worry about the inherent volatility of the new market for Bitcoin. Trading in Bitcoin certainly has its risks, so do proceed with caution if you decide to dabble in the emerging currency.
More on Fundraising?
Their phenomenal funding success stories of three players attempting to disrupt the ecommerce, payments and travel industries has great lessons for innovative entrepreneurs. Here's a look at what they can teach the rest of us -- even if we're working in decidedly more modest operations.
New to fundraising? Wondering how to choose a financing option that suits the scale of your enterprise and plans for expansion? You may end up with a hybrid approach, but it's worth understanding all of the options available. Here are a few ideas.
Not only makers of physical objects are turning to crowdfunding. With his latest book project -- Z.E.R.O. -- marketing guru Joseph Jaffe launched a Kickstarter to fund the publication of the book with his parter Maarten Albarda. "We wondered what would happen if we self-funded the self-published book, so if someone asked us, how much did the book cost you, we could say zero," Jaffe explains.