May 2015

Bitcoin is in the news all the time now, but does anyone actually know what it is and what it’s used for? This month we attempt to clarify what on earth this new currency is all about.

Bitcoin is essentially a new digital peer-to-peer currency which is created and held electronically. It doesn’t have a central body or group controlling it, rather it is controlled by all Bitcoin users, with everyone using compatible software to utilise the technology. There are no banks involved in controlling one’s Bitcoins or charging sizeable fees.

This relatively new techology facilitates online transactions which are all authenticated by digital signatures lurking behind the scenes. Bitcoin is based on mathematical formula, as opposed to, say, the price of gold or the economic performance of a certain country.

Bitcoin is becoming much more windespread now and big players are taking note of what Bitcoin is doing right. Just this week it’s been reported that NASDAQ will be utilising blockchain technology currently used by the Bitcoin network to keep a track of its digital transactions. This technology would allow for faster, more secure trades, decentrallised from any bank.

Last week The New York Times reported that “New York state’s top financial regulator has granted the first license to a Bitcoin exchange, allowing it to open legally to customers across the United States.” The exchange is called itBit and has immediately commenced taking on customers. “This is a big deal, not just for us, but for the entire Bitcoin industry,” said itBit’s chief executive.

Goldman Sachs recently came out stating that Bitcoin could help shape the ‘future of finance’. “Innovations in network technology and cryptography could change the speed and mechanics of moving money”, their report said in March.

Making a payment with Bitcoin is simple. It’s like moving money from your wallet into your wife’s wallet, using your computer or smart phone instead of giving her cash. You don’t need a bank or merchant facilities or anything else you might usually need to transfer money between people or businesses. While it’s not mainstream yet, it won’t hurt to keep an eye on what this relatively new digital currency is up to over the next year or two.