9 questions about Bitcoins you were too embarrassed to ask

Claudia Vera, Online Editor-In-Chief

1. What exactly is Bitcoin?

The name itself sets a “SciFi” connotation to Bitcoin, causing listeners to ponder on whether it is an actual item or a character from the television show Doctor Who. In reality, Bitcoin is a virtual and global currency that is completely decentralized, meaning that there is no specific “source” in which the money is generated.

2. If there isn’t a single source for the creation of Bitcoins, does that mean I could write “money” on a napkin and call it a Bitcoin?

Not exactly. Bitcoins are generated through a system of complex algorithms given to a computer. If the computer is able to decode the 64-digit algorithm, then voila! Fifty new Bitcoins have been born.

3. That doesn’t sound so bad…does that mean that I could generate an infinite amount of Bitcoins? Could I end up “rolling in the Bitcoin dough”?

Unfortunately, there is a catch to the Bitcoin creation process. The act of generating Bitcoins is known as “mining” (hi ho, hi ho, it’s off to generate Bitcoins we go…). Mining is an act of luck since there are only 21 million Bitcoins that could ever be created. Let’s all pray that we have smart, algorithmic-solving laptops…yes, I’m looking at you, Apple.

4. How much is a Bitcoin even worth? Is it just a token, or does it have any monetary value?

At this point in time, one Bitcoin is equivalent to roughly 70 U.S dollars. However, the concept of Bitcoins revolves around a self-stabilizing system, basically meaning that the monetary value of Bitcoins is constantly changing, much like the latest trends among teenagers; you never know what will come next.

5. Since Bitcoins are an online currency, can I use them to pay for real life objects? 

Websites such as WordPress are now offering Bitcoins as a valid method of payment. However, if you were to show up at McDonalds and attempt to pay with Bitcoins, you would probably leave the restaurant empty handed. For now, trying to pay with Bitcoins in stores has the equivalent effect of handing Monopoly money to the cashier…it just does not work.

6. If I can’t spend Bitcoins in real life, then where is the value coming from? Why do people care so much about these mystical, intangible tokens?

The real value of Bitcoins stems from the mining process. Bitcoins are considered the “gold of the Internet,” something rare and treasured, so the time and effort taken into generating the coins all adds up to their value. To put it into simpler terms, imagine that Bitcoins were like collectable vintage records. Although you cannot purchase anything with the records themselves, the more you have, the more they will be worth in the future.

7. Would others be willing to trade their Bitcoins with me?

Why yes, yes they would! These transactions are known as “exchanges”, in which one party trades Bitcoins for another type of payment, including international currency. Exchanges allow those who mine for Bitcoins to receive actual payment, while those who seek Bitcoins try to collect them for future value.

8. It all sounds rather exciting…I do not see how it could have any flaws (apart from being a virtual, unsupervised version of currency that is self-stabilizing AND completely decentralized). 

Alas, this Internet wonder has found a way down the path of corruption. Since Bitcoins have the ability to become untraceable (when put in the hands of an expert), they can be used in transactions such as money laundering and exchanges on The Silk Road – the Internet’s very own network of underground drug-marketing.

9. Now that’s definitely not a Silk Road I would want to trade my Bitcoins on. However, I do feel more knowledgeable in regards to this new trend. Now I have a challenge for you: summarize Bitcoins in one sentence that is so easy that a five-year-old could understand it. 

Here we go: in a nutshell, Bitcoins are Internet tokens that can be traded for money, are born from computers who answer difficult math equations, and whose value is constantly on a roller coaster. Fortunately for this roller coaster, there is no height limit; give a five-year-old a smart computer, and they will be the proud new owner of Bitcoins.