Bitcoin may soon be part of your daily life
Bitcoin used to be a daily buzz word; from why you needed it to how to use it, everyone was buzzing about the currency. Now, scuttlebutt surrounding the newest currency kid on the block is scarce at best, but it is still around, still relevant, and here’s why:
Bitcoin experienced a plummet from a high price of $1,242 in December 2013 to a mere $238, according to Stratechery. Now this may seem to make my point about Bitcoin being relevant invalid, but consider this: 21 Inc., a Bitcoin-focused startup, announced they had raised $116 million.
While they didn’t specifically state this was for furthering Bitcoin, Andreessen Horowitz and Matthew Pauker said, “Bitcoin is going to change the way that people and businesses and even machines interact with each other, but for Bitcoin to realize that vision we need mass adoption. It can’t just be for Silicon Valley.”
Wait, what’s Bitcoin?
Herein lies the problem: people do not understand what Bitcoin is, how it’s useful, and why it should interest them. If you’re in the “what the heck is Bitcoin” group, you’re not alone. Here’s what is it and how you can use it (and why it’s probably the next trendy thing).
Bitcoin is digital currency. When I say digital, I mean completely digital, operating free from banking institutions. Okay, not completely digital, as you can attain physical Bitcoins, but this does defeat the original premise behind an “all digital” currency and enthusiasts greatly prefer the digital variety.
So, Bitcoin is 98% digital. I liken Bitcoin to tokens that you used to get in gaming arcades, with one exception: Bitcoin currency can be broken down into fractions (called satoshis). Using the token example, you gave the machine $1, you got four tokens. With Bitcoin, those 4 “tokens” could be divided into multiple fractions, giving you more bang for your buck…or Bitcoin.
When you decide to spend a Bitcoin, the transaction is submitted to a global peer-to-peer network. Compare this to those old illegal music downloading sites, only this is legal. Then, the transaction is verified, entered into public record (also called blockchains). These blockchains have a record of every Bitcoin ever made, so they know who own each one, including fractionals, which helps prevent fraud. These p2p networks are not verifying for free though, they are rewarded with Bitcoins for their efforts, making the Bitcoin system self-supporting. Think of it like PayPal’s fees, only digital.
Don’t get confused, these will be common words soon
When tech gurus and Bitcoin enthusiasts talk about Bitcoin, you’ll hear words like “cryptographic keys” and “cryptocurrency.” These can be confusing for newbies, who aren’t even sure what Bitcoin does; let’s face it, it can be confusing even if you do know what Bitcoin does. This is a complicated way to describe how the information is transferred. Bitcoin uses public key encryption4 techniques for security.
Basically, when a new Bitcoin address is created, a cryptographic key pair is also created. This consists of a public key and private key. These keys are unique, long strings of letters and numbers; a bit like when you have the computer generate a secure password for your site, or email. This keeps Bitcoin secure, and unique to the address that created it.
If you’re ready to get your feet wet in the Bitcoin world, there’s a great primer that even a kiddo can understand. Just remember the one caveat of Bitcoin: the balance isn’t insured, as it isn’t held by any institution. If a hacker breaks into your computer, or your hard drive crashes, you could lose all your “money.”
Now you get it, so let’s circle back to 21 Inc.
For the more advanced Bitcoiners, let’s look at what 21 Inc. is really doing with the money they raised. To understand what they’re doing, you need to know a little about Bitcoin mining. Mining refers to the computer-intensive process of generating Bitcoins. Any computer can mine a Bitcoin with freeware, but it takes a great deal of space and time to complete the process, due to the complex algorithms.
Miners use computers to track and record pending Bitcoin transactions every ten minutes into a new block. Then, they must be verified. The first miner to solve the algorithm and verify the transaction, uploads the results to the Bitcoin network.
This upload, or algorithm answer, is also called a block. When the rest of the Bitcoin network confirms the solution, the block is added to the block chain. The miner who solved the algorithm is then paid 25 Bitcoins for their efforts. Now you can see why some Bitcoin enthusiasts love it: the thrill of the problem solving and reward.
Now, on to 21 Inc. They “unofficially” announced on Medium. 21 Inc. stated, after much hard work, they’ve “created an embeddable mining chip, which [they] call the BitShare.”
This BitShare chip “can be embedded into an internet-connected device as a standalone chip, or integrated into an existing chipset as a block of IP to generate a continuous stream of digital currency for use in a wide variety of applications.” To clarify this, BitShare, simplifies that long computer-intensive process and places it in a chip. This allows you to use your mobile devices as Bitcoin mining devices, along with a whole host of possibilities. This chip could simplify the mining process and allow more users to adopt the Bitcoin concept.
And finally, the Bitcoin crux and why 21 Inc. is so important
Thus, the Bitcoin crux: to be successful and really get off the ground, more users need to adopt the concept. However, the very users that need to adopt it, have passed it off as a fad, or of something of disinterest.
Given the chance to try Bitcoin though, these same users, may begin to understand and enjoy the experience. 21 Inc. is hoping to bridge the gap between the Bitcoin enthusiasts and the “what the heck is Bitcoin” group.
21 Inc. wants to be the AOL CD of Bitcoin by “giving every user a free trial of Bitcoin at near-zero marginal cost” and to onboard millions of users.
This may help bring the additional users needed to the Bitcoin game. It certainly worked for AOL; remember all those CDs hanging in WalMart, Best Buy, and the like. What do you think? Will more users help bring Bitcoin into the usability sphere, or will it require something more to get Bitcoin off the ground?