Virtual Currency Gains Ground in Actual World

4 August 2013Finance

Kate Murphy reporting for the New York Times:

More businesses are accepting bitcoins lately thanks to Bitpay, which supplies software for processing bitcoin payments. The merchant pays a 0.99 percent fee per transaction versus the 2 to 4 percent fees charged by credit card companies. Bitpay will also immediately convert bitcoins to dollars if the merchant desires.

Bitcoins have gained in popularity lately, largely due to their increasing value. Bitcoins are a decentralized digital currency first introduced in 2009. They allow participants to transact without the need of a financial intermediary, using peer-to-peer technology. Think of bitcoins as the Napster or BitTorrent of banking.

While I find the technology behind bitcoins interesting and there are practical uses for the digital currency in making payments, I don’t see why anyone would invest in bitcoins as a long-term strategy. They hold no inherent value, there are several recent examples of bitcoin theft, and the currency has been extremely volatile. Bitcoins are a startup currency and the current hype reminds me of the dot-com startup bubble. While there was a lot of money to be made for those that were savvy enough to get out early, we all know how that bubble ended.