Crypto-currencies like Bitcoin are starting to grow in popularity. Fellow Utah company Overstock.com recently started accepting bitcoins for payments, and even a local charity called The Road Home accepts Bitcoin donations. The currency is in its infancy, which means it’s a little unstable, but as usage becomes more mainstream, you might find yourself using it sometime soon. As people adopt Bitcoin, questions about its advantages certainly arise, along with questions about how to keep it protected.
Advantages and disadvantages of Bitcoin
The advantages to using Bitcoin include things like the fact that you don’t have to pay any sort of fees to transfer money from one person to another, the idea that inflation risk is lower, and the fact that you can keep as much of your own money as you care to on a single memory stick in your pocket or device or whatever. On the flipside, the currency is untraceable, which makes its usage very popular among criminals, it’s somewhat difficult to trade Bitcoins, and very few places currently accept it. Not only has that, but the value of Bitcoin fluctuates very quickly, making it less stable and more volatile than federal currency at present, and none of it is backed by the FDIC.
The other interesting thing is that although bitcoins are stored on your own computer in encrypted format, you essentially become your own bank when you use them. There are services that will store your Bitcoins in a digital wallet like Multibit and Bitcoin Wallet, but it’s you’re responsibility to make sure your money is safe, and not just from hackers, but from hardware failure as well.
It’s interesting to think about the fact that currency can be reduced to lines of code on a computer, but when it comes to Bitcoin, that’s exactly the case. If you’ve got bitcoins secured on your PC and it dies, your money is gone *poof* like that. Data is valuable to companies and people because data is information. But when that information is literally the currency you use, you have a clearly defined value attached to the data. As of the time of writing this, one bitcoin is worth $675.09 US dollars, meaning those lines of code are worth exactly that much. If your computer dies, you lose the information that your currency is composed of, which means you can be out a lot of money, unless you take precautions.
The best option is to use backup imaging software like ShadowProtect to protect bitcoins. A solution that takes a full image of your entire system will save all the information your bitcoins are composed of (not to mention everything else on the backed up volume) and even encrypt it with up to 256 bit encryption for further protection. Additionally, since bitcoins can be accidentally deleted, a solution like ShadowProtect offers additional protection because backups are taken incrementally and represent multiple points in time. Should you accidentally delete your bitcoins, or your wallet, you’ll have them saved in an earlier backup, meaning you can recover them easily.
Of course, redundancy is key with anything you hope to keep from failing, which means multiple backups are a must– especially if you’re talking about money. That’s why a lot of Bitcoin users will also print out their bitcoins as codes on a piece of paper as a backup. As the Bitcoin wiki explains:
Paper wallets can be used to store bitcoins offline in non-digital format. Using securely generated paper wallets significantly decreases the chances of your bitcoins being stolen by hackers or computer viruses.
Having digital backups as well as paper ensures that you’ve got not just multiple copies, but multiple formats of copies, which amplifies the level of protection you’ve got in that you can store digital copies locally on your computer and physical copies somewhere offsite like a safety deposit box or other secure location. When it comes to keeping track of physical dollar bills, there’s no way to retrieve them if you lose them. But in the case of Bitcoin, as long as you’ve got the information related to the coinage somewhere, you’ll be ok, which is another advantage people may not have considered.
For good or ill, Bitcoin is gaining some ground. As with federal money, understanding how to use and keep bitcoins safe is an important part of the crypto-currency challenge. Now more than ever, it rings true that those who understand how to keep their information secure will have advantages over those who don’t.