The Truth About Bitcoins

Thanks to Floomby’s Blog for the post…

Floomby's Blog

There has been a lot of recent news on bitcoins recently. Most journalist viewing bitcoins as a bubble or just generally a bad system. Here are a few examples from several major news organizations.

Here (CNBC):

Here (Washington Post):

Here(New York Times):

Combine the negative media attention directed towards bitcoins with the recent soar in price, (near 15$ early January 2013 to 140$ late March 2013) mixed signals are sent to investors, potential investors, miners, and the people in general. So what is really happening behind the public’s prying eye?

First, the supply and demand for bitcoins closely follows that of gold. The relationship is driven by both bitcoin’s and gold’s rarity. Gold is mined from the ground, bitcoins from random strings of numbers. Significant amounts of effort go into both processes. Just as there is a fixed amount of gold in the market there is a fixed amount of bitcoins in the market. No entity can create…

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