Bitcoin Essay

What is Bitcoin?

Bitcoin is a peer-to-peer payment system using digital money. It is the first decentralized currency that is controlled by all Bitcoin users around the world, not by a single organization or government. Users everywhere can trade bitcoins worth hundreds of thousands of dollars without going through a middle man, like banks and credit card companies. A growing number of diverse individuals and businesses are starting to use and accept bitcoins. Bitcoins are being used, not just by online services, but also by brick and mortar businesses like restaurants and law firms.

How to Start Using Bitcoin

Users must have a “wallet” to store bitcoins, similar to a bank account, before they can make or receive payments. Bitcoin wallets can in the form of an online web-based service or of software that is stored on a computer’s hard drive, depending on user preference. Coinbase.com is a popular wallet service that contains mobile applications and can also trade a user’s dollars for bitcoins.

It is nearly impossible to purchase bitcoins with a credit card or PayPal because these transactions are easily reversible and more susceptible to “chargebacks” which is one of the problems that Bitcoin is trying to solve. One can acquire bitcoins by purchasing them at a bitcoin exchange, as a payment for goods and services, or through competitive mining.

How does it work?

Mining is a process in which users, called “miners”, process payments and secure the network in exchange for transaction fees and newly minted bitcoins. The procedure is known as “mining” because it is an analogy to gold miners who dig gold out of the ground so that everyone else can use it. As new bitcoins are created, more miners join the network, making t...

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...014, an online company called Silk Road was hacked and approximately 4,500 bitcoins, worth about $2.7 million, were stolen. This attack allegedly occurred because of a flaw in Bitcoin that allowed hackers to repeatedly withdrawal bitcoins from the Silk Road’s accounts. This situation has greatly diminished Bitcoin’s credibility and the public’s confidence in the new currency. (Pagliery).

This story exemplifies the disadvantages that can arise from being a relatively new electronic currency. It is likely that there are still flaws to be found within Bitcoin, and it is difficult to determine how successful it will be in the future. However, if you wish to take advantage of the low transaction fees, quick transactions, and high level of control over your money, you should consider using Bitcoin: just be aware of the possible disadvantages that may come with it.