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Should We All Be Investing in Bitcoins?

Bitcoin is a peer-to-peer cryptocurrency that is used to buy goods and services online that in some cases offers total anonymity to both buyer and seller. It is being used to buy and sell illegal drugs and lots of other illicit things anonymously online. It’s also being used to solicit the assassination of politicians. You can also use Bitcoin to buy books, music, clothing and lots of other perfectly legal stuff online as well. Very soon we may all be using Bitcoins instead of credit cards to buy things online since there are no interest charges or fees attached to the use of Bitcoins.

A couple of weeks ago you might have been forgiven for waving off Bitcoins as just another passing fad but Bitcoins suddenly gained relevance this week when the U.S Senate held hearings on Bitcoin and during those proceedings U.S. Federal Reserve Chairman Ben Bernanke told Senators that trading Bitcoins for goods and services is not illegal and seemed to give the new cryptocurrency a nod of approval.

Another good reason that Bitcoins are in the news a lot lately is because in January of this year one Bitcoin was valued at around 13 U.S. dollars and today they are worth 700 U.S. dollars. And just in the past week Bitcoins have tripled in value.

Back when Bitcoin was invented by the super-secret, pseudonymous Bitcoin founder Satoshi Nakamoto in 2009, the virtual currency was worth mere pennies.

There can only ever be a finite number of Bitcoins – 21 million, in fact. There are not yet 21 million Bitcoins in existence because the remaining Bitcoins have
yet to be “mined’. Bitcoins are “mined” on computers by folks who are a lot more tech-savvy than me using mind-numbingly complicated algorithms that become progressively more sophisticated as more and more Bitcoins are “mined”. The more Bitcoins that are “mined”, the more difficult “mining” Bitcoins becomes. If you’re interested in “mining” your own Bitcoins, you’d better start sooner rather than later because soon you’ll need a bank of super- computers to dig up even one or two.

Even though it is possible today to use Bitcoins to buy practically anything imaginable, it remains for now far simpler to use a bank card or paypal. Most of the people who are buying Bitcoins today are probably buying them as an investment. It’s very possible that the value of Bitcoins is highly inflated and this is just a bubble about to pop. It’s also just as possible that next November a single Bitcoin could be worth over three times what it is today. And it will be if the current trend continues.

So should we be mining Bitcoins? Should we at least be hoarding a few? Something to think about.

I’m @Scoroncocolo on Twitter.