I just saw that the Bulgarian article about bitcoin has been linked at BitcoinWatch.com, so I decided to provide a quick translation of it for whomever is interested to get an idea about what is said. I am not a very good translator, so sometimes the English translation may sound unnatural as it is too close in word order to the Bulgarian original.
And if you like my translation, please send me bitcoins at the address below
The original can be found here:http://www.capital.bg/biznes/tehnologii_i_nauka/2011/04/20/1078604_torent_valuta/
Bitcoin is trying to change the way we use money today
“The greatest minds of my generation are working on how to convince people to click on ad banners. That’s dumb.” The words belong to Jeff Hamberbaher(?) - the 27 year old mathematician genius, who graduated Harvard. He is part of the team at Facebook, that created the analytic technology, upon which the ad business of the greatest social network in the world is based.
Not all companies are trying to convince people to watch ads. One of the nice exceptions, that appeared in the last two years, is Bitcoin. It is an organization that tries to make its currency popular. On top of this, Bitcoin is not a company, and it does not rely on millions in investment.
The bitcoin currency may become popular on the net, because it is not controlled by a central institution, and does not rely on middle men as does paypal. Cross border transactions can be done instantly and without bureaucracy.
All transfers are anonymous, the data is encrypted. With bitcoin journalist organizations like Wikileaks, for example, will never have trouble financing themselves. The software is open source, and everybody is free to improve it and create applications based on Bitcoin.
The project does not have its own infrastructure and works on the computers of tens of thousands of users. However, the lack of a controlling entity has its shortcomings, as some users may use Bitcoin for money laundering and financing of criminal schemes.
To trade with Bitcoins, people need to download the software on their computer. The transfer of money happens, when the sender and receiver exchange their encrypted addresses. After that the Bitcoins change their owners, and the software records the transaction, so that it is clear that the sender now has a smaller total amount. The technology used is based on p2p transactions, like torrents, and that is why the process for confirming the transfer may take from 10 minutes to an hour.
There are two main differences between bitcoin and Facebook credits (10 credits = 1$). The main one is that Bitcoins are limited in quantity and in theory the supply of money is limited. The other difference is that Facebook keeps 30% of all income, that developers earn via Credits. Bitcoin lacks such fees.
What can you buy?
There are three ways to get bitcoins. First, you can buy them with real money. The exchange rate is floating and at the moment is $1.2 for a bitcoin. The other way, is through the sale of goods and services, which the seller can exchange for bitcoins. The currency can also be generated from nothing, without human intervention. When the users start their software, they can choose the option to divert their computer resources towards the encrypting algorithm of Bitcoin. Like in a lottery, the successful solution of a concrete problem during the ciphering is rewarded with a certain quantity of bitcoins.
The system is designed so that, every ten minutes 50 new bitcoins enter circulation no matter how many people are online. The creators claim that this is equivalent to the creation of new money from a single central bank. This scheme is valid in the first four years of the project. Every subsequent four years, the number of newly created coins will be halved. So that at the next stage 25 bitcoins will be created. This imitates the exhaustion of natural resources, similar to gold. According to this logic, the total number of bitcoins in circulation will reach 21 million.
200 traders use bitcoins. Among them are web hosting providers, free-lancers, gambling sites, online drug sellers, etc Some of the goods traded for bitcoins are second hand cars or IT services. It seems that the greatest challenge to Bitcoin is to convince people outside of IT that it is worth using Bitcoins instead of cash or credit cards.
“The most important things for a currency are trust and stability. Right now bitcoin has neither” - comments Derek Bambauer, a law professors at Brooklyn Law School.
There is no additional value
The creator of Bitcoin is the Japanese programmer Satoshi Nakamato. There is no public information about him, in fact some people think that is just a pseudonym. The team that works on Bitcoin has never seen him. Nakamato only communicates via the internet. The Japanese man announced the project two years ago, and since the code was open, the community has taken over the development since. It is thought, that Satoshi Nakamoto has a large number of bitcoins, because the sooner a person starts working with bitcoin, the larger amount of currency they can accumulate. This is why the programmer has an incentive to keep the value of bitcoins high.
According to most analysts Bitcoin does not have the chance to replace traditional currencies because people are already used to them and the lack of additional value. “The dollar has two advantages to bitcoin. The most obvious one is that the American government collects taxes in dollars”, writes Timothy Lee, a PhD student at Princeton University.
According to him, Bitcoin will fail precisely because of the lack of control. In order to increase to flow of bitcoins towards them, some members of the network will collude, and will change the rules for their own benefit, says Timothy Lee. This may lead to an alternative network, which may undermine the original currency. The other possibility according to Timothy Lee is that the creation of a central controlling entity, which will change the algorithm in favor of some members. The existence of such central banks will contravene the principles of bitcoin, and it’s existences will be undermined, thinks Lee.
“The question before Bitcoin is how it will work with governments and big banks. In the end, a currency needs to be easily convertible. The supporters of bitcoin what is it that is unique that they give, and other currencies do not offer.”, thinks Prof. Bambauer. He adds: “”If the users of Bitcoin decide that it is most important for them that there exists no central authority, then it is very likely that the state will regulate the network due to fears of money laundering and financing of terrorism.”
Despite the doubts the analysts say that Bitcoin is a bold experiment, which proves that a lot of money is not necessary to change the system. Even one as conservative and slow as the financial one.