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Home Op-Ed Tech Wise by Peter Vogel Bitcoin uses digital wallet

Bitcoin uses digital wallet

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Start-up company pays bills via crypto-currencies
(Caption: Peter Vogel writes on an online currency that is quickly gaining traction among major companies. Photo credit: Luismmolina / Getty Images)
 
Bitcoin. You may have heard the term, but unless you are male and in the 18-24 age group, it's unlikely that that means much to you. 
 
Even then, only a small portion of that young male demographic is familiar with Bitcoin, let alone uses it.
 
So just what is Bitcoin, the best known example of a class known as crypto-currencies?
Mark Andreessen, the well known creator of Netscape, the browser that for many, a generation ago, made possible their first experiences with the Internet, recently stated in a Cnet News interview that Bitcoin is the technology he most wishes he had invented.
 
Furthermore, he noted that the potential for Bitcoin is staggering, but that most consumers do not yet see its potential.
 
Think of Bitcoin as cash for the Internet. It is essentially a digital currency, as opposed to a fiat currency, that is one backed by some form of government regulation. Essentially, Bitcoin is the world's first start-up currency.
 
In other words, it is a currency that sprang from an idea. It is operated, and in essence, run by, its users. There is no central authority, no national bank, no federal reserve, no group of middlemen that might govern or control the destiny of Bitcoin.
 
Bitcoin is an open-source currency. This means that the software that operates Bitcoin is openly published, and developers are free to work with and modify this software as they see fit.
 
To an end-user, Bitcoin is nothing more than a digital wallet controlled by an application.
 
Bitcoin currency can be sent to and from this wallet, an electronic transaction not much different from the movement of fiat monies from one account to another, or to a company to pay a bill through online banking.
 
Where Bitcoin transactions are different from bank transactions is in the fees that might be charged. At present there are either no fees, or these fees are very small. Certainly they are dramatically lower than typical bank and credit card fees.
 
This makes Bitcoin particularly appealing to merchants, who are typically hit with significant transaction fees when customers pay with credit cards.
 
In addition, merchants appreciate Bitcoin transactions because they contain no personally identifiable information. Think of all the major credit card hacks across North America over the past year to consider just how important this is.
 
From the customer perspective, Bitcoin use means that merchants can't ring up additional charges after a transaction, something that is straightforward when a credit card is involved.
 
Although Bitcoin is not yet widely accepted (try buying a candy bar with it at the corner store) it is becoming more prevalent by the day.
 
Many big companies have seen merit in handling Bitcoin transactions. Computer giant Dell does, and it recently reported an order involving an order for computer servers valued at $50,000.
 
The customer paid for the order in Bitcoin and Dell saved some $5,000 in fees it would otherwise have incurred.
 
BC-based Sandman Hotels accepts Bitcoin payments. So does giant travel reseller Expedia. Some 80,000 stores are set up to handle Bitcoin transactions.
 
To be sure that is just a small fraction of retailers, but the important point is that this number is growing rapidly. Already the daily transaction value in Bitcoin exceeds that of Western Union.
 
Actually acquiring Bitcoin remains a difficult procedure that needs to be simplified. The first ATM to dispense Bitcoin was actually installed in a Vancouver coffee shop.
 
Not that the machine dispensed anything physical, mind you. After all, Bitcoin is a digital currency, a specially encrypted key stored in your digital wallet.
 
Unlike paper money, Bitcoin can be backed up electronically. If you lose a physical wallet you can pretty much say goodbye to any cash it contained.
 
With Bitcoin, as long as the digital key is intact and accessible, the value of the wallet remains intact.
 
For more on Bitcoin check out Bitcoin.org and watch for a local screening of the feature-length film The Rise and Rise of Bitcoin.
Last Updated on Monday, 10 November 2014 07:40  

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