Bits and Pieces: The Digital World of Bitcoin Currency
Bitcoin is the most prominent privately issued digital currency today. It is neither issued by a government nor backed by a physical commodity. Bitcoin’s underlying technology also serves as the basis of an electronic payments network. Bitcoin is the first technology that allows people to reliably exchange funds on the Internet without relying on a third party, such as a bank or PayPal. A key aspect of the technology is the blockchain, a publicly available database that records every bitcoin transaction. Bitcoins are created by “miners,” who expend resources to create new bitcoins, analogous to the physical process of mining gold. Unlike gold mining, the number of bitcoins to be produced is determined by a fixed schedule. Bitcoin is now accepted as payment by well-known companies, such as Dell, Papa John’s, and Overstock.com, but it remains a very small part of global commerce. It is a technological innovation with the potential to benefit millions of people. Policymakers should prevent burdensome regulations that single out Bitcoin’s development or drive it offshore.