Why Bitcoin has become a popular alternate currency

Bitcoin is one of several cyrpto-currencies aka digital currencies

By Amber Satka

Bitcoin started out as a novelty for many, but it has quickly become a popular alternative currency.

What is Bitcoin? If you haven't heard of it, Bitcoin is a digital currency that was founded through an open-source software code in 2009. it's not real money, but it can be bought and sold like stocks. That means that if your Bitcoins increase in value, you can sell them for more money. Though Bitcoin is not real money, some vendors are starting to accept them for online payment, including some retailers of computer games, jewelry, guns and more.

Bitcoins are generated through a computational mining process. You set up the program and let it run, and you start collecting Bitcoins. It's easy and it's free. The system is set up so that no more than 21 million Bitcoins will be created. Of course, you can also buy Bitcoins from other users.

So why is Bitcoin becoming so popular? Here are a few reasons:

It is decentralized

There is no regulating agency for Bitcoin. There are no banks that process your transactions. The money is contained in your account, and when you buy or sell coins, they are moved to or from another account. Rather than these being like traditional bank accounts, they are more like virtual wallets. The difference is that there is no authority that backs up your money. No bank to authorize the transaction or to guarantee it.

While this lack of oversight may be concerning to some, it is liberating to others. Libertarians and others who want more control over their own money and less government oversight are very excited about the possibilities that Bitcoins offer.

It is anonymous

Bitcoins have no serial number and no other mechanism to trace them. You can also trade them anonymously through peer-to-peer file sharing programs. That means that you can buy, sell and trade in Bitcoins completely anonymously. Again, those who are suspicious or resentful of government intrusion love this aspect of the virtual currency. The privacy protection provided by Bitcoin is detailed in the video below.

However, many are concerned that the anonymous nature of Bitcoins will allow them to be used for illegal purposes, such as selling drugs, laundering money or funding terrorism. Federal regulators have considered imposing some oversight onto the system, but no action has yet been taken. We're sure that if Bitcoin realizes its dream of becoming a global currency and its users grow, regulation will be put in place.
Bitcoin #1

Confidence in the dollar is low

As the economy has weakened, so has the dollar. Investors have looked for alternative currencies to invest in, and Bitcoin has filled that role for many. Earlier this year, the value of one Bitcoin rose from $20 to $220. However, the currency is also very volatile, and it quickly fell in value by almost 60 percent. 
 

Since Bitcoins have no fixed value, they fluctuate in value just like stocks would. That makes them very attractive to investors, who potentially have a lot to gain by investing in them.

What do you think of Bitcoin? Will you be learning more and considering investing in it? Tell us your thoughts about this compelling new digital currency in the comments!

About the author: Amber Satka writes on financial topics, such as her look into the auto rebate calculator. Amber is a former office manager and current mother and writer. 

Image attribution: CASASCIUS; CC BY-SA 3.0