Bitcoin, the new currency traded only online, has been met with skepticism and hesitation by many people in many parts of the world. Not so in Israel. In Israel, Bitcoins rule.
Unveiled to the public on January 3, 2009, the Bitcoin uses open source software and creates a digital currency -- hence the name. Cryptography is used to control the creation of the currency -- which is why it is referred to as a crypto-currency. New bitcoins are created through a process called mining which takes place when computer programmers compete against each other and the winner gets a bundle of 25 bitcoins. (The idea is Bitcoin the currency is bitcoins)
There are over 12 million bitcoins now in circulation and their potential total value is about $9 billion. Once the coins are mined they can be traded, exchanged and used to purchase any goods or services that accept them online. Because it is traded and exchanged online there are almost no fees and Bitcoin trading and use bypasses all banking bureaucracy. None of this sits well with central banks or private banks and federal governments are upset because they cannot track Bitcoin funds for tax, security and criminal reasons.
There are risks. Bitcoins are not protected by the FDIC (Federal Deposit Insurance Corp.) and they have been used for nefarious activity, including money laundering. In November of 2013, 96,000 bitcoins were stolen from an online pharmacy called Sheep Marketplace. At about $700 per Bitcoin the total theft was over $67 million. The coins were tracked down, but the money was never recovered. And then during the second week of February of this year, a scam was perpetrated against Bitcoin by people making a transaction and then gaming the system by first halting and then starting many other transactions. That scam was doable because of a flaw in the Bitcoin system that publicly records and sets transactions every 10 minutes. Ten minutes is a very large window of opportunity when you're dealing with corruption.
Because of the glitch the value of the Bitcoin fell 13 percent to $660. Like all currencies it has a value and is traded. As the value increases so does its equivalent dollar value. Despite its limitations, however, there is no doubt that the future of Bitcoin transactions is going to grow and grow fast. And, it will be protected.
Over the past 20 months, over 25 startups have emerged out of Israel , creating tools to help provide better and more secure, faster and more efficient transactions, of Bitcoins. That makes Israel one of the largest Bitcoin technological centers in the world, right alongside Silicon Valley and Singapore.
In Israel, when it comes to Bitcoins, it's not just about the technology. A Bitcoin ATM is now open and operational in Israel. The ATM converts 200 currencies and operated in 25 languages. ATMs like this one exist only in two other countries, Australia and Canada. It has a biometric scanner to confirm identity and a daily transaction limit.
There is even a Bitcoin Embassy and a Bitcoin café in Tel Aviv where Bitcoin people can congregate, face-to-face. In other parts of the world, Bitcoin fans and fanatics and traders congregate virtually on Faceook pages where they share and dialogue about issues. The embassy and the café will become incubators for Bitcoin ideas, places where startups can setup and work on ideas and projects,
If you want to do it all online, Israel has made it even easier for their local, and for the Hebrew speaking, population.
A Hebrew website has been created to help people engage in Bitcoin support and chats. The site is called www.alefbit.com -- it is a play on the first two letters of the Aleph Bet, the Hebrew alphabet. The term Aleph Bet also means learning the basics. Actually, there is an etymological debate over whether the word alphabet comes from the first two letters in Hebrew or from Greek alphabets. Of course, there is also a Bitcoin Hebrew Facebook page.
And there is actually an association of Israel Bitcoin users. The address is www.bitcoin.org.il. Israelis specializes in these kinds of ventures, the technologies are now part of the ethos of the Israeli society. Everyone knows someone in high tech -- or is in high tech. Startup, creative technologies, cyber security, bio tech and yes, even hacking, are all part and parcel of what Israel is today.
At some point, everyone has to relax. Israel's Bitcoin people have found the perfect place to do just that. They go to a tavern in Tel Aviv for Bitcoin and beer meet-ups. The tavern accepts Bitcoins.
If each Bitcoin is around or about $700, they must be running up pretty big tabs.
The Morning Email helps you start your workday with everything you need to know: breaking news, entertainment and a dash of fun. Learn more