What is Bitcoin? (part I)

Every semester, I take my students from Columbia College to Chicago Federal Bank’s Money Museum.  It’s a great experience for the students, and I also learn something new with every visit.  On our last visit, I pulled one of the PhDs aside (they all possess a doctorate degree in Economics) and asked, “what do you think about bitcoin?”  The presenter gave me a one sentence answer – it’s a safe haven for illicit traders.  Probably a little too harsh answer, so I did my own research.

  • What is bitcoin?  It’s a virtual currency created by an unknown Japanese programmer (only his pseudonym is known).  It’s not associated with any country or government, making it truly universal.
  • How does it work?  Every user has a “wallet” with a unique identifier.  While all transactions are recorded, user ID is kept anonymous (OK, so that supports illicit trade comment).
  • How  do I get bitcoins?  Various exchange sites / services let you buy and sell for cash.  You can also mine them (honestly I don’t get this concept).

To be continued…

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About Richard Lee
Experienced finance and operations professional. Currently partner in five companies, adjunct professor of economics at Columbia College and executive contributor to a small business blog (www.SMBmatters.com); following corporate finance, M&A and management consulting tenures with Orbitz and Diamond Technology Partners; and six years of service with the United States Army.

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