How Cyprus crisis has some thinking of Bitcoin
Amid the banking crisis in Cyprus, an online-only currency called Bitcoin is getting new attention. How does the currency work and who regulates it?
Amid the banking crisis in Cyprus, an online-only currency called Bitcoin is getting new attention. Some argue it could be used as a safe haven for people worried about having their deposits taxed in Cypriot banks. Evidence that people turned to Bitcoin amid the Cyprus mess is actually quite slim, although one company announced last week it wanted to create the first Bitcoin ATM in Cyprus.
And with the added attention comes increased scrutiny from regulators around the world. U.S. authorities have come out with some new guidelines, and that has rankled some Bitcoin advocates.
“It was very well designed, the technology makes it so that you don’t need a central authority to check where transactions are going,” says Adrianne Jeffries, who has been covering Bitcoin for The Verge.
But what exactly is Bitcoin?
How big is the Bitcoin economy? By some calculations, the currency is actually a billion-dollar industry. On March 28, 2013, the peer-to-peer virtual currency’s total value exceeded $1 billion. That amount surpasses the value of the entire currency stock of countries like Bhutan and Liberia.
Where did Bitcoin come from? On January 3, 2009, Satoshi Nakamoto, a Japanese mathematician, created Bitcoin because he wanted a currency “immune to the predations of bankers and politicians.”
How is the price of Bitcoin decided? In the early days of its existence, a small group of users who traded the currency on forums decided its price. Today, people can use real currencies (like the U.S. dollar) to buy the virtual currency on real-world exchanges. These exchanges decide Bitcoin’s price based on what people are willing to pay. Mt. Gox is the largest of these exchanges. If you’re interested in obtaining bitcoins, here’s a site.
Where can I use my Bitcoin? There are several sites that list places that accept the currency directly. One website that may be considering accepting the virtual currency: OKCupid. There’s a website where you can hear Bitcoin transactions in real time through sound. University of California student Maximillian Laumeister created the “Listen to Bitcoin” website, which creates chime sounds for every transaction on the network.
