If you’ve never heard of Bitcoin, or you think of it in a negative light, here’s some reading that will help you gain a better understanding of what it is:
Here is the German Finance Ministry’s view of Bitcoin (BTC):
The German Finance Ministry recently made Bitcoin officially usable in the country by classifying it as a unique financial instrument that’s not quite national nor foreign currency but rather “private money” that can be legally used to transmit value between parties, like swapping gold or stock certificates to settle up. “We should have competition in the production of money,” said German Finance Committee parliament member Frank Schaeffler. He discourages hasty decisions on the fate of virtual currency: “Sooner or later, depending on the success of private currencies, authorities will feel the urge to ban or regulate private currency. A free country should resist and not intervene in citizen’s private choice of money.”
What an excellent attitude to have! I wholeheartedly agree with this. The value of any currency is not determined by government, but by many individuals all making their own decisions which accumulates into what we call The Market. The Market decides what the value of a currency is. What many people struggle to understand is how money becomes money. How does something which is essentially valueless, attain value? Well, the key to understanding this dilemma is knowing that not ANYTHING can take on the role of money. It has to have very specific properties, such as:
- It must be able to act as an efficient store of value
- It must be easily convertible into either goods or services directly, or indirectly into other trusted currencies that are tradeable for goods and services
- It must be scarce
Bitcoin meets all these criteria. So how does it attain value? That is probably the hardest concept to understand. After all, any number of people could deploy a new virtual currency and many already have. Some of them may be known to you, such as Second Life Linden dollars, OMC and ACD. There is also Litecoin, a variant of Bitcoin. The fact is that a currency gains value just as a political party gains power. At first it is obscure and has little value / power, but as it becomes known to more people and they accept it / vote for it, it gains value / power, until eventually it achieves critical mass and it becomes a mainstream juggernaut. A little acorn grows into a large oak tree.
So, the truth is that you do not have to personally value Bitcoin, you just need to realise that many people do and if you wish to purchase a Bitcoin, you will have to pay real money to get one. Vice versa, if you own a Bitcoin, you can sell it for US dollars, British Pounds, Euros, Swiss Francs, South African Rands etc. You can also purchase goods and services directly. In time, I expect South African shoppers to be able to purchase goods marked in Bitcoins simply by scanning a QR code with their smart phones and authorising payment from their online eWallet via an app on their phone.
To be sure, Bitcoin is still a maturing vehicle of commerce and the bitcoin protocol and the client software that people use to transmit Bitcoins to others is still undergoing improvement to make transacting in Bitcoins an easier task. More reading: Bitcoin payment protocol improvements
If you wish to begin trading and / or investing in Bitcoins, I can recommend virwox.com and bitx.co.za. BitX.co.za is a South African Bitcoin Exchange. This site allows you to buy BTC with ZAR and sell BTC for ZAR. Current price for 1 BTC is around R1700.