BUDAPEST: Since February 10 you can pay Budapest Taxi with virtual money in the capital. Although most Hungarians have probably heard nothing about Bitcoins (BTC) yet, Budapest is where the next bold step into the direction of cashless payments is under way. The first mention of “Bitcoin” dates to 2008, written by someone under the pseudonym Satoshi Nakamoto in a post on a mailing list about cryptography. In 2009 the first free source Bitcoin software appeared with the first 50 units. It’s based on an even older idea of the cryptographic currency, described by Wei Dain as “b-money” in 1998, and later named as “bit gold” by the Hungarian-born Nick Szabo.
Bitcoin is made up of a payment system and the monetary unit, which is purchased or drawn using the corresponding online provider in a decentralised way through the computer network, using an own software called “Bitcoin Core”. The system is based on being part of a co-managed database, which records all transactions in a chain of blocks (in a virtual register) without using a central settlement agent – as is usual in ordinary bank traffic.
The balance of the participants is stored in personal digital “purses”. Cryptographic software helps ensure that only the Bitcoin owners make transactions and that the currency units won’t be used multiple times. This is why Bitcoins are considered a “cryptographic currency”.
The Bitcoin system therefore is not subject to physical or geographical limitations except for needing an internet connection – and therefore it can be used freely across countries. The market value of Bitcoins is formulated based on supply and demand. Compared to the market of foreign currencies, the exchange rate is subject to strong fluctuations for this reason.
Initially Bitcoins did not have a value expressed in other currencies; the first exchange rates were negotiated by people on Bitcoin forums in 2010. In 2011 you could buy one BTC for under USD 10. In April 2013 the exchange rate already hit USD 266, however it fell to under USD 50, so by 80% within one week.
In November 2013 the exchange rate even exceeded USD 1100, however there was a subsequent strong decline following the bankruptcy of the Bitcoin handling software “Mt. Gox” in February 2014. Since then the range lies between USD 180 and 300. In the beginning of 2016 one BTC was traded for almost USD 450.
In the case of transferring money, fees apply. At the moment the minimum fee is 0.00001 BTC. The reasons for a fee are to reward participants for handling the transactions, and to prevent the network from being intentionally overloaded with transactions. The higher the transferring participant sets the fee, the faster the transaction is carried out.