|Photo credits: BTC Keychain|
Before we begin, let's go over the basics of Bitcoin for those who may not be familiar. Basically, bitcoins is a form of virtual currency that can be used online or traded for "real" dollars around the world. It's created by being mined - this means that it's generated when computers are used to solve complex mathematical problems. In exchange for computer processing power, people receive bitcoins. This is commonly referred to as mining for bitcoins.
Will Virtual Currency Affect Demand for Physical Currency?
This is a question that is on a lot of minds - for good reason. While there are no studies or research that shows this is happening currently, it's a very good possibility in the very near future for quite a few different reasons.
For one, as Bitcoin becomes more acceptable as a means to buy and sell items, there is going to be a noticeable decrease in the demand for physical currency - notes and coins. While this hasn't happened yet, there are many signs that it's not only possible but probable in the years ahead.
And this isn't the only economic impact bitcoins will have on the world economy. While some may argue that bitcoins are too small to affect something as large and diverse as the economic situation in the world markets, others believe that there's a very good chance that bitcoins are going to affect world markets in the near future.
Other Economic Impacts of Bitcoins
Looking further into the matter, it's clear to see that there are some economic impacts from the use of bitcoins. Many said the shutdown of Silk Road - that used bitcoins to sell drugs illegally online - is actually going to help bitcoin's image in the long run. This is because Bitcoin has been lumped in with illegal activities online. That's changing, however, for the better. For many, this is a sign that bitcoins are about to be taken a bit more seriously and that will lead to it's popularity increasing. The entrance of a virtual currency into world trade markets may really shake things up.
For one thing, because bitcoins are based on problems being solved - aka bitcoin mining - the production of the money isn't going to be based on the whims of governments or financial institutions that simply print paper currency and mint coins as demand arises and when there's enough collateral at banks to cover it. As bitcoins become more prominent and are used by more people - outside of the fringe - this is going to get a lot of people thinking about how money is made these days.
Bitcoin prices hit record highs this year because they're beginning to become more mainstream. While not everyone knows about them at this time, this is quickly changing. That can be seen by the fluctuating prices seen earlier this year. As virtual currencies become even more popular, their value is going to increase which will have a real effect on traditional forms of currency.
Author Bio: Maegred Mithi knows quite a bit about Panasonic energy saving washing machines that you can buy online. When not shopping for appliances, Maegred likes to learn about corporate reputation management online.