#Bitcoin

"The trouble with quotes on the Internet is that you can never know if they are genuine" 

- Abraham Lincoln

First, some technical stuff:

Bitcoin is digital currency.

Bitcoin is an open source payment network.  Open source is a model that promotes universal access via free user licenses to the product's design or blueprint, and allows universal redistribution of that design or blueprint.

Bitcoin is a peer-to-peer payment network, meaning that tasks (e.g. searching for files or streaming audio/video) are shared amongst multiple interconnected peers, who each make a portion of their resources (like processing power, storage, bandwidth, etc.) available to other network participants, without the need for centralized coordination by servers.

Transactions transfer bitcoins, the individual units of currency, between Bitcoin addresses derived from public keys.  To spend the funds associated with an address, a user must broadcast a payment message that was digitally signed, with the associated private key. 

Transactions are verified by a decentralized network of computers globally.  These computers use a unique system to prevent people from copying and spending the same bitcoin multiple times.   Operators of these computers are called miners, and they are rewarded with transaction fees, and newly minted bitcoins.

Now, the fun stuff:

Bitcoin was supposedly created in 2009 by Satoshi Nakamoto.  However, the name "Satoshi Nakamoto" is a pseudonym for the unknown person or people who designed the original Bitcoin protocol in 2008 and launched the network in 2009.

Investigations into the real identity of Satoshi Nakamoto have been attempted by The New Yorker and Fast Company, but unsuccessfully, to date anyway.

And now, even more fun stuff:

Last year The Economist reasoned that Bitcoin has been popular because of "its role in dodgy online markets."   And earlier this year, the FBI shut down Silk Road, a service specializing in illegal drugs (after which the FBI took control of about 1.5% of all bitcoins in circulation).

However, bitcoins are increasingly being offered and used as payment for legitimate products and/or services.  Incentives for merchants include lower transaction fees, e.g. 2-3% less than typical credit card processing fees.

Speculators have been attracted to Bitcoin, fueling volatility and price swings. As of November 2013, the use of Bitcoin in the retail and commercial marketplace is relatively small.  On the other hand, the use of bitcoins by speculators is relatively huge!

These speculators expect the currency to increase in value as its popularity widens.  But, bitcoins really lack any intrinsic value (underlying fundamental value as an investment vehicle), because the value of bitcoins depend only on the willingness of users to accept them.

Some investment funds have shown interest in Bitcoin.  Recently Peter Thiel's Founders Fund invested $3 million.  The Winklevoss twins – of Facebook fame – are said to have made a $1.5 million personal investment.

As for BesterInvestor… no position, while I watch the drama unfolding, with my sense of humor still intact!