What everyone should know about bitcoin

Unless you have been living under a rock for the past couple of years, you have probably heard about bitcoin. What makes bitcoin fascinating is that it’s the first currency which is not just free, as in ‘free beer’ but free as in ‘free speech’. In fact, ever since the first standardised coins were created in Western Turkey in the 7th Century BC, money has never been associated with all of the following 3: Open, Universal and Free. Bitcoin changed that.

I have been following Bitcoin for a while now and I have seen a whole economy of miners,mining equipment makers, payment processors, money exchangers, and speculators rising up around it. It is actually thriving. At the same time, there are a ton of people trying to make money off of it. Some are legitimate businesses and some are pure gambles.

In this article I will explain what bitcoin is, how it works and how one can start using it from Zimbabwe. I will also attempt to debunk some myths surrounding Bitcoin.

What is bitcoin?

Bitcoins are digital coins you can send through the internet. Bitcoin is the first decentralised digital currency and what this means is that unlike government-issued fiat currency, bitcoin has no central issuing authority. In other words, no Central Bank controls it, so government can’t just print or mint the more of the currency.

How Bitcoins are created

Just as in the old days when gold and silver were mined, bitcoins are mined, digitally. Mining is a slow process of using powerful computers to solve complex math problems and when they succeed they unearth more Bitcoins.  Bitcoins are generated all over the internet by anyone running a free application called a bitcoin miner. The more Bitcoins that are mined, the more difficult it gets to mine more information.

Some facts about Bitcoin

• Bitcoin was created by a Japanese person called Natoshi Sikomosho. Nobody know who he is. This kinda rang a bell. Most people believe this is a pseudonym and there are more people behind the creation of Bitcoin.

• Bitcoin is a digital currency and bitcoins are stored in a digital wallet.
• Bitcoin is abbreviated as BTC.

• Like gold and silver, we don’t have an unlimited number of bitcoins. There will only be about 21 million bitcoins made. That number will be reached in 2140.
• About 11.4 million bitcoins have been mined so far. The Facebook-famous Winklevoss twins claimed to own 1 percent of that in April this year.
• Total value of all bitcoins in circulation is over US$1.3 billion.
• Only one major security incident in the protocol which was fixed in August 2010.
• At the time of this writing, 42972 bitcoin transactions have been made in the last 24 hours , over a million bitcoins have been sent in the last 24 hours
• Several exchanges exist where you can trade your Bitcoins for real money

Advantages of Bitcoin (Compare to the alternatives)

• Transactions are cheap and mostly free. And it’s very difficult to find something cheaper than free.
• You can use them in every country (Yes, Including Zimbabwe)
• Your account cannot be frozen
• There are no prerequisites or arbitrary limits
• It has built in protection against double spending

The risks (apart from the fact that it could all be a bubble about to burst ):

• Your wallet can be hacked (https://en.bitcoin.it/wiki/Weaknesses)
• They can drop in value after you buy them. This year alone, the price of a Bitcoin rose from less than US$20 to over $250 and has dropped to (at the time of this writing) $115. I doubt however that the Redditor with a wife and child who used the $30,000 limit on his credit card to buy Bitcoin when it was valued at $14-25 USD and cashed out when it went above $200 is complaining.
• Government could step in and try to regulate it. FinCERN has already started to do so in the US.
• Transactions are uninsured and totally irreversible. But maybe this is actually an advantage.
• It’s traceable – the whole network sees that a particular transaction happened, and that money moved from one place to another place. It is possible however to make a payment without attaching your identity to the payment.
• It can be used to launder money. But regulators have already started applying AML restrictions.

Other interesting stuff

• Someone in Cyprus has built a bitcoin ATM
• Those in Kenya can now link their bitcoin wallet to their M-pesa wallet

Ways you can obtain Bitcoins

Using and getting Bitcoins is really easy. There are various ways to get Bitcoins:

• ‘Mining’
• Any one of the many bitcoin exchanges out there.
• Providing services to others in return for bitcoins
• Free samples and offers

How your company can start using Bitcoin (in Zimbabwe) today

Here are some ways you can start using bitcoin (if you are not already thinking of building your business solely around bitcoin):

1. Accepting bitcoin as a means of payment for Goods and Services
2. Paying employee salaries
3. Paying for expenses

To start accepting Bitcoin on your website, you can choose from a plethora of shopping cart interfaces, or if you are a developer, you can build your own JSON Interface. Nearly all the bitcoin merchants I tried out required me to supply KYC information before I could start using them and I especially got problems verifying my local bank account because my bank is asking for an invoice before they can make a wire transfer. I particularly liked BitMerch which allowed me to accept Bitcoins without supplying any KYC information and I bumped into another one which required I have a US bank account :(.

Who else is accepting Bitcoins

Popular websites (you may already be familiar with) that accept Bitcoins include, WordPress.com,  The Pirate Bay, Reddit, The Internet Archive (they even pay employees with Bitcoins) and Namecheap.

Conclusion

Will bitcoin take off in Zimbabwe? It’s hard to say; I don’t know if you’ll be able to use it to buy a beer in Harare any time soon. But what I do know is that my landlord is probably going to be the last person who’ll accept bitcoin payments.

Here is a bitcoin Infographic: