Bitcoin

Click here for a Bob Rankin article entitled Should You Invest in Bitcoins? Excerpt:

What is Bitcoin?

Bitcoin is a form of currency that relies on cryptography for authentication (verifying that the currency is legitimate and hasn’t been tampered with) and peer-to-peer networking technology for transaction processing and records archiving. A unit of currency, also called a Bitcoin, is created out of thin air and given to someone in exchange for his/her work: processing transactions for the Bitcoin community. That person may then exchange Bitcoins for other things.

Existing Bitcoins are used in trade just like traditional currencies, with records of transactions being kept by the Bitcoin community. In fact, the first thing a desktop or Android Bitcoin app (called a “wallet”) does is download every single transaction since the first Bitcoin was created. That takes more than a day, I can attest! (Future apps are supposed to eliminate the need for this.)

No government controls or manages the Bitcoin system; the community of Bitcoin users does so through open-source software that implements the Bitcoin protocol. The peer-to-peer network that supports the Bitcoin system is as elusive and resilient as the Bittorrent network that continually defies government interference with music and video trading. Government taxation, confiscation, and direct manipulation of the value of a Bitcoin are practically impossible; a good thing, in many opinions.

On the other hand, no government can protect Bitcoin users from getting ripped off. If you pay with Bitcoins and don’t receive what was promised, you are on your own. No one has figured out how to break into the Bitcoin network and steal Bitcoins yet, but no computer system is invulnerable. If someone gets into the software “wallet” from which you manage your Bitcoins, they can spend all of your virtual money. There is no way to challenge unauthorized transactions; there is no one in charge to accept such a challenge.