The most popular virtual currency, or crypto-currency in the world. But is it really that safe?
Like all things in life, all things are only worth what people will pay for them. I mean, we don’t have much use for the physical attributes of metal disks and shiny bits of paper, but what they are worth, however, is something different. We trade these metal disks and shiny bits of paper for other objects that are worth a similar amount. Of course, the worth of these items is relative, because how useful is a metal disk, or shiny piece of paper, really? It’s not worth anything if it can’t be traded for something more useful to you. Cue in the virtual currencies.
The lack of a physical form to the monetary value casts seeds of doubt in a lot of peoples minds, and I think that puts people off the idea. However, your entire bank balance is virtual; a number on the screen. You can trade this number for physical coin, and then trade that physical coin with items. A virtual currency skips the physical coin, and trades items directly with the number on the screen.
The idea, in essence, works really well. It avoids a lot of the problems with the current monetary system, makes international currency trading a lot simpler and cuts a lot of the difficult logistics of physical money. But, in practise the virtual currencies are more complex.
The Bitcoin currency works by using computers to solve a difficult mathematical problem. The person who answers the problem is rewarded with a coin. But what is the worth in these virtual coins? It’s worth what people will pay or trade for it. With this premise, virtual currencies fluctuate in value a lot, as the more bitcoins that are generated, the harder it is for the next bitcoin to be generated. This increases the bitcoins worth. However, bitcoins, like any other currency, are reliant on those who use them and the trust people put into them.
The long and the short of it is that bitcoins and virtual currencies are very good in practise, but in reality leave a lot to be desired.