Friday, September 6, 2013

Casual Fridays: Bitcoin

My experience with Bitcoin has been bittersweet. It is a fantastic idea and an idea that will someday replace currency in one form or another.

For those unfamiliar with Bitcoin it  is also called cryptocurrency. That is, rather than physical money that you can carry around, Bitcoin is made up of a cryptographic string of data that can be traded on exchanges much like stocks are traded and exchanged on the stock exchange.

Bitcoin was something that Gigastrand was wanting to get in on. After unsuccessfully searching for a domestic exchange that would fill our needs, we finally settled on Japanese exchange, MT. Gox.

Mt. Gox is the largest and oldest Bitcoin exchange. It has the most applications and is the most PayPal like of all the exchanges. It was fairly easy to get started with them however, there was a long drawn out verification process that took some time to get through. Once we made it through the verification process, we were in business.

It was fairly easy to set up a small store that took Bitcoin. We simply programmed buttons like you do in PayPal and cut and paste the code onto a webpage. The buttons themselves could translate from US dollars to Bitcoin or vice versa depending on which button you select. We chose to start with US dollars and have it translated into Bitcoin. The reason for that was simple: US dollars are a relatively fixed value currency. Whereas Bitcoin goes up and down in value like a share of stock in the stock market. If you try to fix your value with Bitcoin, the value of the item you purchase will change with the value of the Bitcoin.

One of the issues we had with MT. Gox was trying to get US dollars into our account. Mt. Gox, for all intents and purposes, is a Japanese bank. It required us to do an international transfer which cost us $20. Then, the money set in limbo for 4 months while we waited for the transaction to complete. They finally got in touch with us, but failed to transfer the money into our account until just about a week ago from this post.

A single Bitcoin is currently valued above $100 in US currency. As people buy and sell the value goes up and down depending on how much supply or demand there is for the Bitcoin. When Bitcoin was 1st introduced, its value was only a few dollars. With the banking crises in Europe, the value has gone way up past $250 at one point as people in those countries have bought up Bitcoin rather than their own unstable native currency. As those crises subside, Bitcoin has stabilized. However, it still fluctuates between $70 and $150 with the average being about $120.

Bitcoin has another technique called mining. Yes, you heard right, you can actually mine Bitcoin. The problem with this is that as each new Bitcoin is mined the next one is even harder to process. As a result, it requires very single-minded devices with a lot of processing power just to create the next Bitcoin. These devices cost several thousand dollars apiece. It is not something you can do on your personal computer.

There is an Android app that monitors and tracks the value of Bitcoin and I use it on my phone. I can see the value as it goes up and down and, if I wanted to, make buy or sell decisions based on that information.

For now, Gigastrand is currently not accepting Bitcoin for purchases made on our website. Part of this decision is based on the fact that our new online store does not have the capability of accepting Bitcoin. However, Gigastrand is not ruling Bitcoin completely out just yet.

As for the average person, Bitcoin is still a bit too geeky to use. However, for those willing to do a little research and a lot of learning, Bitcoin can be a fun and even money making opportunity.


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