Still perceived by many to be the choice of currency for shady black market dealings, Bitcoin is starting to gain legitimacy as a valid form of digital currency. A disruptive innovation that has led to a number of startups and even its own Silicon Valley accelerator, Bitcoin has already succeeded in challenging the long-held notion that governments control the supply of money. And now it has a Foundation making the rounds on Capitol Hill.
In November, Bitcoin made its political debut with a couple of Senate hearings, after which U.S. policymakers decided to adopt a “wait and see” approach. The Central Bank of China adopted the same position. Bitcoin’s proponents point that the internet faced that initial "cautiously optimistic nod" from policymakers in its early days. Other governments have banned it, such as Thailand's central bank, which declared in July that it was illegal to trade the digital currency. Yet other nations have decided to acknowledge it as an asset, such as Germany did when its finance ministry recognized it as a “unit of account”, thereby including bitcoins in its capital gains tax collection pool.
What is this financial innovation about and why is Silicon Valley paying just as much attention to it as Capitol Hill?
Bitcoin is a virtual monetary system based on a peer-to-peer model of digital tokens. Rather than relying on confidence in a central authority or third party, Bitcoin depends on a transaction ledger that is cryptographically verified and jointly maintained by the currency’s users. You can watch this youtube video, but here the basics about the Bitcoin system:
The supporters of this new currency point out several benefits of the system, such as:
Concerns also abound, and depending on your perspective, they could include the following:
Regardless of which side of the debate you are on, one thing is for sure—Bitcoin is a disruptive innovation that has captured the attention of bottom-up startup communities as well as top-down government types alike.
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