Bitcoin - the future of money?
Money in various forms has been used as a store of value and as a means to buy and sell goods and services for thousands of years. There are plenty of sources around where you can read all about the history of money, so I won't repeat all that here. Suffice to say money has changed a lot since it was first used. Today, "fiat" currency is what's used around the world. Fiat currency is legal tender whose value is backed by the government that issued it. This is where Bitcoin is so different. Unlike Fiat currency, Bitcoin is not backed by a government, it is "decentralised" meaning no one entity controls it. Let's say you live in a country with high inflation - like Venezuela. Any fiat currency you hold is devaluing against other currencies rapidly, and each day you can buy less and less with it. Whereas Bitcoin has been steadily increasing in value over the past few years. So by holding your money as Bitcoins, you effectively protect yourself against the inflation.
The technology behind Bitcoin is really quite ingenious, it's called Blockchain. The Blockchain is a ledger of all bitcoin transactions since it's inception in 2008. But instead of that ledger being held by one institution, it is held by thousands of different people around the globe. When a transaction occurs, it is added to everyone's copy of the ledger. This means there is no one single point of failure. No centralised "official" copy exists, and no one user is trusted more than any other. If a server crashes and the ledger is lost, it doesn't matter as there are many other copies. It's called a "Blockchain" because it is a chain of blocks. Each block has a timestamp and a link to the previous block. Once a new block is added, the previous block cannot be modified as that would invalidate the chain, so the previous block is effectively locked in. There are plenty of resources around to learn more about Blockchain technology, it's an incredible invention and I believe will become more widespread as time goes by, not only for use with Bitcoin, but in the banking industry more broadly.
Bitcoin has seen an incredible increase in value since it was first introduced on 31 October 2008 by Satoshi Nakamoto. In 2011 it was worth $US0.30, now in March 2017 it is worth over US$1200. It has seen a lot of volatility over that time, but that volatility has decreased. Here's an interesting graph from The Bitcoin Volatility index showing volatility changes over the last 7 years.
As you can see, things are stabalising, which is good news for Bitcoin as it means more merchants are prepared to use Bitcoins in their businesses. There are already plenty of big names accepting Bitcoins as payment for some or all of their services such as Microsoft, Dell, Tiger Direct, Wordpress, Subway, Zynga, Tesla, and Kmart. There are also gift card merchants like Gyft who accept bitcoins.
After the financial crisis of 2008, many people no longer trust or want their government to control the value of the currency they use. Bitcoin is a way for consumers to regain control of their money. In a way, holding bitcoins, you become your own bank! It's an exciting time for this digital currency, and I'm confident it will go from strength to strength as it becomes more widely accepted and used.
If you're keen to get involved, take a look at BTC Markets. They are one of many Bitcoin exchanges around the world where you can deposit fiat currency and buy and sell Bitcoins. It's a simple way to get started with this exciting new currency.