By now, most people have heard about a new currency called “bitcoins”, but bitcoins are still quite misunderstood and maligned. Browsing the Internet, you’ll find wildly diverse opinions on the virtual currency and its future. Despite this, many merchants are beginning to accept bitcoins for payment. Our interest was piqued recently when Overstock.com‘s CEO, Patrick Byrne, announced that Overstock would be accepting bitcoins as a legitimate form of payment. At the same time, he had plenty to say about Paul Krugman’s attack on Bitcoin, Krugman calling it “evil”. Their very different takes on Bitcoin seem to reflect the current diversity of opinions on Bitcoin in general.
So, what exactly are bitcoins? From Wikipedia:
Bitcoin is a peer-to-peer payment system and digital currency introduced as open source software in 2009 by pseudonymous developer Satoshi Nakamoto. It is a cryptocurrency, so-called because it uses cryptography to control the creation and transfer of money. Users send payments by broadcasting digitally signed messages to the network. Participants known as miners verify and timestamp transactions into a shared public record called the block chain, for which they are rewarded with transaction fees and newly minted bitcoins. Conventionally “Bitcoin” capitalized refers to the technology and network whereas “bitcoins” lowercase refers to the currency itself. Bitcoins can be obtained by mining or in exchange for products, services, or other currencies.
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