A Brave New Crypto World

By David Drake

What is Bitcoin?

If you are an early tech adopter or stay up-to-date with financial news, you probably have heard of the crypto-currency called Bitcoin (BTC). It’s actually a two in one product: a currency like EUR, GBP, or USD as well as a peer-to-peer electronic cash system  or digital payment network. We can differentiate these two by referring to both as Bitcoin, the currency as Bitcoins, and the system as the Bitcoin network. For practical purposes, using Bitcoin to pay for things is similar to using cash, debit card, or any other digital payment service. It is just another tool which allows someone to pay for something or transfer funds.

Why is it such a big deal?

A key difference is that Bitcoin is not centrally controlled. Transactions are validated through a fully transparent accounting ledger and secured by rigorous computational work by network peers. This means you have greater control over your own Bitcoins. You do not have to rely on a bank or another institution which may charge you fees, impose limits on how you can use your money, or may even go bankrupt and carry your money with them drown the drain.

Likewise, the supply and distribution rates of Bitcoins is predetermined and limited. Thus, the Bitcoin network can verify authorized Bitcoins. It is nearly impossible to print fake Bitcoins and place them in circulation, the way you can with regular currencies like the US Dollar. Bitcoin is also a fully transparent and yet anonymous payment system. Every single transaction from the beginning of time is publicly available for viewing, with balances of each account. However, you don’t need to associate your name with your Bitcoins the way you do with a bank account or credit card.

“Bitcoin is borderless” says Brad Chun, Director of Bitcoin Strategy at Victoria Global. “This is my favorite part. Because there is no central controlling entity setting rules where you can and can’t use your Bitcoins, you can use them in any country, at any time, with anyone you wish. In terms of potential significance to the world, it ranks close to the airplane, telephone, or internet. I see Bitcoin as the seed for a truly singular global economy and a tool that all entrepreneurs should be evaluating as part of their business strategy.”

Looking past Bitcoin

Despite the amazing features that Bitcoin offers, it’s not a perfect fit for everyone.

Depending on your needs, there are still places where it can be improved as a currency and a network. Most of this bleeding edge research is happening, in real-time, in alternative crypto-currencies or altcoins. Each altcoin is a copy of Bitcoin with some upgrades. When asked what he thought of altcoins, Brad stated: “As a believer in free market economics, I am in awe of the evolution that is taking place outside of any regulatory framework. Literally, hundreds of altcoins have been created in the past few months. Most have floundered but some have gained quite a bit of traction and demand. It will be interesting to see what this ecosystem will look like,  5 to 10 years from now.”

Here are some examples:

These are just a few of the many altcoins that exist.  No one knows how many or which crypto-currencies will succeed. While most people are focusing on Bitcoin, you should do your own research. The next best thing might already be out there.

In New York City, the Inside Bitcoins conference will be held on the 7th and 8th of April, this coming Monday and Tuesday. The Crypto-Currency Convention  on Altcoins, on the other hand, will be held on the 9th of April. They are both good places to meet people in the community and get involved. Catch them if you happen to be in the city.

Note: This article originally appeared on Equities with this link  http://www.equities.com/editors-desk/currencies-forex/brave-new-crypto-world on April 05, 2014

David Drake is an early-stage equity expert and the founder and chairman of LDJ Capital, a New York City private equity advisory firm, and The Soho Loft - The Voice of Capital Formation – a global financial media company with divisions in Corporate Communications, Publishing and Expos. You can reach him directly at [email protected].