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Digital Currency, Bitcoin and Litecoin are Decentralizing Money on the Internet

posted Mar 31, 2013, 5:49 PM by Darryl Giors   [ updated Feb 5, 2014, 2:22 AM ]
Bitcoin and Litecoin emblems

New currencies operating on secure P2P platforms are creating opportunities for wealth, privacy and easy trading with low fees.

National currencies have always been subject to regulation, inflation and counterfeit.  Organizations on the internet have made moves to provide currencies that are inherently decentralized.  Bitcoin and Litecoin have been dubbed the "Gold" and "Silver" of the internet respectively.

Security of the currency is complex as it involves miners running software on computer hardware generating encryption hashes at high speed.  The combined computational and electrical power exerted by the miners is at such a level that a so called 51% attack, in which the security of the coin network could be broken would be cost-prohibitive to achieve by any one entity or pool of miners.  In fact if any entity ever achieved such a position they would arguably be shooting themselves in the foot if they broke the confidence users have in the currency when they would be able to mine over 50% of the coins remaining.

Due to the very high security and decentralization, regulation and counterfeit are of very little concern.

What about inflation?  Bitcoin and Litecoin were built from the start to have a pre-determined number of coins in circulation.  The coins are being introduced at a decreasing rate over time until over a period of years all of the BTC and LTC will be in circulation.  BTC is limited to 21 million units - ever. LTC is limited to 84 million.

Other advantages over using credit cards are increased privacyinstant signup, and much lower fees.  For merchants there is another advantage, no chargebacks.  Buyers may need to be a little more wary as they are on their own if there is a dispute with a merchant, whereas credit cards always favor the buyer.  That said the transaction fees of digital coin are far below the common 2%-5% required of credit card transactions.

It's a brave new idea and there are enough users out there that the technology is entrenched.  Being a peer network it's unlikely to go away.  The question remains if BTC and LTC will remain relevant in the future.  BTC currently trades at roughly $90 per coin.  Speculators say these coins could some day be worth $1000 or more. How much more?  Some say the sky's the limit because there will only be so many million coins in existence.  If they remain popular and more merchants and individuals accept them as tender then they could be worth hundreds or thousands of times more in the future.  But what if acceptance dwindles?  So too will demand and the coins will fade into obscurity as a neat experiment that never made it to greatness.