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Bitcoins: Shopping With Virtual Money

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What are bitcoins?

Bitcoins: Shopping With Virtual Money. Bitcoins are a virtual means of payment. This digital currency was introduced by private individuals in 2009 and is intended to be an alternative to the conventional monetary system. Bitcoins are independent of governments and central banks. Instead, they are generated locally by computers using a cryptographic formula. Encryption techniques are used to make it impossible to copy or falsify this Internet currency. The total amount of electronic money is limited to 21 million units. Among other things, this is intended to put a stop to bitcoin inflation from the outset. However, the limit ultimately also means that not only people who see the new currency as a pure means of payment use Bitcoins but even speculators who hope for price gains from the digital currency.

At the beginning of August 2017, there was a division into “Bitcoin” and “Bitcoin Cash”. Ultimately, different views within the Bitcoin community led to the division. As more and more users are using Bitcoins, the technical processes that are supposed to make the transactions transparent and secure ensure that only around seven transactions per second are possible. In practice, it can, therefore happen that a transfer can only be carried out after several hours have elapsed. A group of developers is thus introducing “Bitcoin Cash”. A higher storage capacity should ensure faster processing.

In practice, this leads to a fork or split in the digital currency. Anyone who wants to pay with digital currency must in future pay close attention to whether they wish to do so with “Bitcoin” or “Bitcoin Cash”. And whether the online service through which the payment is to be made enables this. The further development and especially the impact of the division must be awaited.

With “Bitcoin Private” and “Bitcoin Gold” there were two more forks in October 2017 and February 2018, respectively.

Consumers are increasingly complaining about providers who lure them into dubious investments with deals in Bitcoins and other cryptocurrencies. The market watchdog experts at the Hessen consumer centre are currently investigating complaints about almost 20 different providers and six currencies. Prohibited pyramid schemes could be hidden behind such offers .

Acquisition of bitcoins

Bitcoins can be bought on individual exchanges at the current price. Alternatively, they can also be purchased by other users on certain trading platforms and marketplaces. Theoretically, interested parties can also make computing capacity available to generate the bitcoins and thus access the digital currency. Since, however, correspondingly powerful computers are required for this, this approach is usually ruled out.

How are bitcoins secured?

Technically, the encryption techniques mentioned are supposed to guarantee security; the virtual currency is not legally protected at all. Bitcoins, indeed, are not legal tender and are not controlled by any central bank, government or regulatory agency. So whoever buys Bitcoins is relying solely on trust? on the belief that someone else will accept this internet currency. However, there is no legal claim to this. If you want to use Bitcoins as a means of payment, you should make sure that the contractual partner also accepts Bitcoins before buying. For Bitcoins, there is neither deposit protection nor protection via a gold standard or any other security.

Anyone who views Bitcoins not only as a means of payment but also as a possible financial investment should therefore bear in mind that the capital invested in Bitcoins is generally at risk of the total loss.

Where can bitcoins be used?

From the basic idea, Bitcoins are primarily intended for online purchases. In the meantime, however, the digital currency is no longer only accepted by a few internet shops, individual service providers and retailers also use virtual money. Even though the adoption of bitcoins has increased over the years, the number of companies that accept this electronic money is still manageable. Users should, therefore, not be able to rely on being able to pay an outstanding amount with bitcoins.

HISTORICAL DEVELOPMENT

The story began in 2009 when private individuals introduced Bitcoins as an alternative to traditional payment methods. After the first exchange rates formed in 2010, users were initially able to purchase Bitcoins for rates below ten US dollars. In 2013 the course sale took an adventurous course. After various price increases and decreases, the bitcoins reached a record value of over 1,200 US dollars in November 2013. Then a downward movement set in, with Bitcoins losing more than half of their value within a short time. Until the division into “Bitcoin” and “Bitcoin Cash” in August 2017, the digital currency finally rose to a rate of around 2,700 US dollars. In December 2017, the virtual currency rose to just under 20,000 US dollars in only a few weeks,

Bitcoins are not only traded in US dollars, but also other currencies such as euros or yen.

Massive price fluctuations

Bitcoins are not only characterized by significant price movements within a year. Significant fluctuations within a single day are also not uncommon. This shows an example of the development on the following two days: Anyone who invests in Bitcoins can more than double their invested capital in a short time, but conversely, they can also lose more than half. With Bitcoins, even a total loss is possible.

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