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):
- Accepting bitcoin as a means of payment for Goods and Services
- Paying employee salaries
- 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:
28 comments
I like he concept but why do something so useless as “solve complex math problems” or are these actually problems that need solving ?
they are part of the protocol, and yes, they need solving. Think of it like ‘ledger clerks’, do we need people solving these ‘complex maths problems’ so that the system works. Yes, yes we do. Google Bitcoin Education Project, for a more detailed understanding.
The answer is not needed by humanity at large, it is needed by the bit coin system to throttle and control the creation of the coins, just like real minerals have to be mined this digital mining controls the pace of release etc.
So does the creators have the 1 billion to pay you for solving puzzles in their system (this is my only trouble), where do they make their money
Its not the creators that need to generate that cash. Its all about the perceived value of a BTC. A korokoza in kwekwe mines for gold and sells to Banks but that does not mean the Creator of Heaven and Earth gave Fidelity Printers/Reserve Bank the cash to redeem gold being sold to them. Its just a demand that has been created
The price of Gold sells above it’s industrial value for that reason
The price of Gold sells above it’s industrial value for that reason.
The only value a bitcoin has is the value we attribute to it, it is not based on any underlying item or real currency. If people did not want to trade them they would be worthless. It is like an old painting by a famous painter, it will sell for millions only because someone is willing to pay to own it. It is intrinsically worthless though.
And this is why I have no interest in owning a bitcoin.
My questions were not necessarily on the value of the bitcoin, it was more on how the ecosystem works, ie solve problem, get a bit coin (more like a token- with a cash-out value), my question then is when you want to redeem the bitcoin, where does that cash come from (assuming – from creators/ bitcoin exchange owners), the second question is (knowing there is no free lunch) where in the process do the bitcoin creators make their moola. Still stumped, kikkikikii.
Afraid of botnets too
See the response I have made to @KuraiMGT:disqus
There is math problem to avoid having them given all to the same person. Everyone that participate receive some. The Bitcoin have to be given at some point and nothing is given to the creator.
Well done on this article
Thank you!
Stumped by this one, are the problems to be solved useful to someone who would get more out of it???
The problem to be solved are necessary for the whole system to prevent double spending. Imagine the difference between World of Warcraft ‘gold’, and a real currency that is extremely useful in the real world. That’s why its needed.
The ‘complex math problems’ which are solved are the one’s which keep the Bitcoin network secure and fluid. So they are not ‘useless’ (at least IMHO). Mining is really the process of assembling the latest transactions, from about up to 10 minutes ago, in a way that they become permanent in the history of chained transactions. When such a ‘block’ of assembled transactions is compiled and added to the history, the ones that devoted computer resources to achieve it are rewarded – this happens every 10 minutes or so – putting more bitcoins in circulation. Only the lucky “miner” that was able to compile the latest block of transactions is rewarded to his designated bitcoin address, but usually miners work in mining pools and share the rewards according to computer resources devoted collectively.
Let me try giving a layman explanation of what mining is:
Bitcoin mining is like playing the lotery. Only difference is that you know exactly what the winning values look like but you can’t control what numbers go on your ticket. Now every two weeks, the lottery gets harder (I’ll explain why in a minute) and the reward halves every 4 years.
Here’s another laymen analogy: Mining is guessing which key opens the door. The first miner to use the correct key gets rewarded.
Thanks mate, but hey, tried wiki, even the treasury specialists are not quite clued how the system actually create value, some even saying its like a ponzi scheme.
I think what’s important is that the people who use it see value in it.
The price of gold is way above it’s industrial value and that’s because of it’s perceived value. That’s the same with bitcoins.
Lots of hack incidences and losses make me wary. But hey, its like being paid to play, kikikikik (at least how i am undrestanding it)
Please change your link ‘Listen to Bitcoin’ – A scammer owns the site now and has installed malware. Read this following thread:
http://www.reddit.com/r/Bitcoin/comments/1ia7q2/listen_to_bitcoin_contains_malware/
There’s another updated site you can link (as per the reddit thread), but please, for your own article and for people caught unaware, CHANGE YOUR LINK! DO NOT TOUCH THAT LINK ANYONE!
Cool stuff hey…!!! Bitcoin transactions are anonymous, which as been cited as both a
strength and a weakness of the currency. Where do you weigh in?
Bitcoin volatility is a sign of weakness of the crypto-currency.
Natoshi Sikomosho, wait.. what?
You should edit the creator of bitcoin ” Natoshi Sikomosho.”. The infographic you provided even puts a different name.
The Bitcoin ATM wasn’t from Cyprus but that is where the company marketing that Bitcoin ATM were planning to deploy their first units due to the banking issues in Cyprus. That was when there was a lot of attention placed on Cyprus, and that has since been less volatile. There might be other jurisdictions that get a Bitcoin ATM before Cyprus.
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