The Future of Currency
Lexi Herman
Last year in my property law class the professor gave a lecture on this new electronic currency known as a “Bitcoin”. The entire class was so confused, our professor decided maybe including Bitcoin questions on the final was not the best idea. What this post will attempt to do is break Bitcoins down as simply as possible.
First off, Bitcoins are a relatively new thing – they were created in 2009 by someone using the alias “Satoshi Nakamoto”. Since their creation, more and more merchants are beginning to accept them just as they would paper money or a credit cards. At “The Business Survival Guide to Bitcoin”, the panelists said that one could pay with bitcoins in almost the same way they can pay with ApplePay. However, this is where the similarities between Bitcoins and paper money ends. Bitcoins are not regulated, therefore, any Bitcoins acquired are not insured by the FDIC and since they are not tied to any country, they are not subject to any country’s regulation.
In addition, the way one acquires bitcoins differs vastly from the way one acquires paper currency. Normally, people make money from going to a job or investing in stocks. With Bitcoins people can buy them, transfer them or mine them. There are several online marketplaces that allow people to sell or buy bitcoins using numerous countries’ paper currencies. According to CNN Money, Mt. Gox is the most popular of these exchanges. People can also transfer bitcoins to each other using mobile apps or computers. CNN Money notes that this transfer is very similar to apps which allow people to send cash digitally. Finally, people can “mine” bitcoins by using their computers to solve complex math puzzles. CNN Money states that a winner is rewarded with 25 bitcoins roughly every 10 minutes. The property professor I mentioned earlier, gave this lecture on bitcoins to show property can be intangible and informal as well as tangible and formal like real estate.
When a person acquires their Bitcoins they save them in a virtual wallet which exists on the user’s computer, phone or in the cloud. As I mentioned earlier, Bitcoins are not regulated and therefore, are not insured by the FDIC, so users should guard their virtual wallet as much as they would their real wallet.
Finally, all bitcoin transactions are conducted anonymously. Although there is a log, the log does not record the names of buyers or sellers. All it contains is each bitcoin owner’s wallet ID. By allowing bitcoin transactions to be completely anonymous, Bitcoins have become the currency of choice for people online buying drugs or engaging in other illicit activities.
Whether Bitcoins will be around in the long term is unknown, but according to the panelists at “The Business Survival Guide to Bitcoin” this type of electronic currency “likely will be around for some time”. The panelists’ reasoning for believing in bitcoins is simple. They believe in the bitcoin’s potential to reduce security concerns because merchants will not have any personal information on file, which far outweighs its use for illicit purposes.
While bitcoins could change the way we do internet shopping in the future when more merchants accept them; bitcoins are unlikely to have any severe ramifications on our economy. Paypal has been around for years which is similar to bitcoins in that merchants do not have personal information, yet people still continue to use credit cards when shopping online. Therefore, even with this new “safer” electronic currency, people are likely to continue using their credit cards.
To find more information on bitcoins and the NYSBA’s Business Law and Corporate Counsel’s “The Business Survival Guide to Bitcoin” check out the March/April 2015 State Bar News.