Tuesday, April 2, 2013

Forbes: Are Bitcoins Safer Than Cyprus?

Bitcoins — the stateless currency maintained by a network of math-problem-solving PCs — has spiked in value since financial crisis struck Cyprus. But are Bitcoins really worth all that? Or do they just provide an object lesson in how quickly trust in a country’s economic system can ebb and flow?

I first encountered Bitcoins back in June 2011. Back then, there was $130 million worth of this weightless virtual currency and its value had spiked 6,000% in the first six months of the year when each one was worth $30. Since then, the ”market capitalization” of the 10,952,975 Bitcoins in circulation has soared to $864 million and they trade at $100 a piece, according to BusinessWeek.

In 2011, Bitcoins were not very widely accepted. You could use them to buy alpaca socks, organic gardening services, a Bitcoin merit badge from NerdMeritBadge.com, and some technology products. And if Senator Charles let Schumer was to be believed, Bitcoins were also a popular way to buy illegal drugs through Silk Road.

On March 20, according to the BBC, a Canadian homeowner, Taylor More, listed his two-bedroom Alberta bungalow for 7,054 Bitcoins — then-worth $56. Heck, you can even use Bitcoins to buy pizza, reports the BBC.

Bitcoins are a peer-to-peer currency named after the file-sharing technology, Bittorrent. Rather than banks and governments issuing Bitcoins, a network of Bitcoin holders’ computers does the heavy lifting. Touted as untraceable, Bitcoins are heaven on earth for libertarians and others who dream of a global economy outside the control of governments.

A mysterious programmer going by “Satoshi Nakamoto” started Bitcoins in 2009 and after he disappeared in 2010, an Amherst, Mass.-based programmer, Gavin Andresen took over the project.

And since crisis erupted in Cyprus, the value of Bitcoins have soared. And why not? The crisis in Cyprus led to a spike in fear about the risk in government-run currencies. As the New York Times reports, the genesis of that fear was Cyprus’s policy of accepting few-questions-asked cash and charging companies an ultra-low 10% tax.

Cash flooded Cyprus from around Europe — a third came from Russian oligarchs. And those deposits turned into loans. According to the Times, a bank would give a a £20,000 loan and a £5,000 credit card to a depositor with a monthly salary of £400. Much of this money went into real estate that soared in price.

And while the 2010 Euro-recession took much of the wind out of Cyprus’s real estate market, it was the purchase of Greek government bonds by Cypriot banks that caused its banking system to collapse. - Read more here: http://www.forbes.com/sites/petercohan/2013/04/02/are-bitcoins-safer-than-cyprus/

Here is a list of sites where you can get free bitcoins

You can find more information on Bitcoin Mining here: http://www.miningbitcoinsforfree.info

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