Discussions around Bit coins can be as simple or as complicated as you desire.  You could for instance, try and understand the hashing, the cryptography, the nuance of the nonce and the mechanics of the technology, which would be like trying to understand the manufacturing process of printing dollar bills. Or you could take a few moments to understand the currency conceptually.  This article facilitates the latter. 

Bit coin or all crypto-currencies can be seen as a dis intermediation process that can save hundreds of millions if not billions annually in transaction costs for consumers. A currency that has successfully created a system of transacting money that requires no intermediary between the person paying and the person receiving, yet there is complete transparency and record of all transactions on what can be described as a ledger that is visible to everyone and stored with everyone. Transactions can all be seen minus the identity of the people transacting if secrecy is needed.

The other significant advantage beyond the instant transactions and absence of intermediary costs is the fact that there will always only be a predetermined finite number of coins (21 Million) and this is ensured by a robust architecture that prevents anyone producing fake coins or fake transactions. What this means is that like Gold which no alchemy can produce and is therefore considered a store of value and a standard, Bit Coins if they were to be taken on by vast numbers of people, would be very valuable.

Now, where does that leave you. Yes specifically ‘You’? What should you do? Well you are a critical and active part of finance beginning today just like you have been important in communications for some years now. In Media, the days of one or two government backed broadsheets and broadcast channels controlling information or news or entertainment are a distant memory. Communication has been truly liberated and transformed by the Internet. Everyone can tweet, report, upload videos, interact on social media etc. From Tunisia and the Arab spring to Wikileaks and cute cat videos, individuals and social media have toppled governments, unleashed a wave of creativity and taken charge of communication. This is not a hypothesis but fact. 

When it comes to money however, the vast public is still used to seeing finance and economics as the domain of government and big business. They see themselves as spectators, the helpless mass that works within the policies of left or right. Who operate within economic policy framed by interest groups and vote banks. Astonishingly most people see themselves as passive components of the socio-economic mix. Criticizing economic policies in the public sphere notwithstanding, there has been limited means for the average individual to free themselves from bad policy or inflation or vote bank economics or big bank monopoly.

All that is set to change.  Like you could buy Gold earlier and not have to keep your money tied to a currency, you can now buy a crypto currency like Bit Coin. While Gold, Oil and other commodities are monopolized by people who’s land these commodities are buried under in their raw form, Bit coins or crypto currencies are not buried under someone’s land, they are ‘mined’ or produced by computers across the world wherever. Yes the machine’s required to mine now have become expensive and powerful as opposed to its early days when you could mine Bit coins on your computer at home. Despite that, there is no physical constraint on who mines the coins, in fact the more diverse the pool of people mining coins, the more robust the architecture. So you have in Bit Coins a means of putting your money in a format that no inflation can touch. Unlike your bank account in your local currency, low interest rates and high inflation cannot rob you of your spending power at the whim of a political party in government. This new currency can be transacted instantly anywhere in the world and converted to any other currency online on an exchange. It removes so many transactional hassles that it ends up producing significant competition for your money and efficiency in the use of it which make it better for the person whose money it is, namely you.

Yes, regulation is needed on money laundering and such activities, but beyond that, the genie is out of the bottle and cannot be stopped. There are plenty of Nay Sayers, who are either still tied to the old textbooks and theories on the nature of money or have vested interest in keeping this transformative innovation in finance out of the public’s imagination. But sure enough, the overwhelming strength of the concept of this technology is apparent in the statements of lawmakers in America, Germany, China and increasingly elsewhere in the world. 

So, you need to get used to your new-found freedom. And like with any newly liberated population, the hesitation is understandable. But you have to remember that you have to act not because you want to speculate on the rising price of Bit Coins, but because you want to remove the hegemony and monopoly of deep pockets and not be found snoozing when the biggest revolution in finance of recent history is taking shape. More valuable than anti banker slogans, or protest marches is being part of this revolutionary change that will go a long way in transforming economics and making it more efficient and democratic. Whether you accept payments in Bit Coins for your business, buy it on an exchange or mine it on a powerful machine, you need to be part of it, because your participation will free economics from existing monopolies and be the path to financial freedom in the new age. 

But even still, if taking part in the potential increase in Bit coin price is your incentive for joining this new economy then here are a few key things to understand. As per the talk given by Tuur Demeester (Editor MacroTrends) on 17th October 2013 in San Jose at the Bit Coin Conference, we are at the early stages of Bit Coin as a technology being adopted around the world.  Projecting valuation of the currency, Mr Demeester presented the following figures:

Bitcoins Value

The above presents a very bullish environment for Bit Coins. This still doesn’t represent the full potential of the Bit Coin economy as it doesn’t include a vast majority of Credit card transactions, many potential new uses or the latent geographic dispersion linked demand for the currency. Anecdotally, Sir Richard Branson announced that Virgin Galactic will accept Bit Coins as payment, Financial Times reported on 29th November 2013 that Alderney a small island in the English channel which is a British Crown Dependency, is considering minting physical Bit Coins to launch itself as the first international center for the new currency. The United States Senate has been holding hearings on digital currencies and have gradually decreased the regulatory risk on the currency. Germany has recognized Bit Coins as Private Money. 

The currency has been used as a safe haven or as a means to getting money out of countries and economies where free capital movement is restricted by the State. China which till recently had become a large part of the Bit Coin world is a prominent example.  Recent volatility, both the sharp rise and then the fall in the value of Bit Coin has resulted from first a rapid demand from the Chinese population and then statements from the People’s Bank of China, which announced that citizens trading in the digital currency were doing so at their own risk and that Banks were not allowed to deal in it like they are in other currencies. This raised the regulatory risk on Bit Coin and led to a fall in its value. The high volatility and evolving opinions of government, people and institutions is likely to keep the currency volatile in these early stages, however the strength of its core architecture, its transactional efficiency and its means as a democratizing force in money and store of value will see it rise as the backbone of payments, transfers and finance. One would therefore be advised to invest and transact in Bit Coins rather than speculate for a quick return. 

As time passes and more people join the Bit Coin economy, it becomes increasingly robust and more and more valuable. The remarkable crowd sourced mining process makes Bit Coins a powerful financial innovation to surpass all in recent history. Welcome to the new economy.