Money, Banking, and International Financechecks for amounts that exceed their account balances. Some businesses and people do not
accept checks because they cannot verify if a person has sufficient funds in his account.
Checks evolved into the last payment system – electronic funds. The most common form
being debit cards. A debit card improves the payments system’s efficiency and extends the
function of checks. Many retail and grocery stores allow consumers to pay for goods and
services using a debit card. When customers purchase their goods and services, they use a
plastic card that contains either a chip or magnetic strip. Next, the store has machines that read
the chip or magnetic strip and allow the store to transfers funds electronically from the
customer’s checking account to the store’s bank account. Consequently, the debit card reduces
the uncertainty the customers have sufficient funds in their account for business transactions.
Although many businesses do not accept checks, they do accept debit cards.
Debit cards expanded electronic funds leading to the automated teller machine (ATM) and
the internet. Automated teller machine (ATM) allows people to withdraw cash from machines
that are located at banks, grocery stores, shopping malls, and gas stations. ATMs are connected
together through computer networks, and one of the largest networks is Visa Debit. The Visa
network allows customers to access their checking and savings accounts at financial institutions
24 hours a day, 7 days a week, from almost every city in the United States, and many foreign
countries around the world. Finally, people can buy products and services, transfer bank funds,
or pay utility bills by sitting behind a computer screen. They only need a computer connection to
the internet to transfer money or pay bills.
Bitcoins
The internet created a new money that exists only in cyberspace. We call this money
Bitcoin, where bit refers to the computer term – a piece of information, either a one or zero. This
money has other names including virtual money or cryptocurrency.
No central bank or government issues Bitcoins, and 11.75 million Bitcoins were circulating
in the world in October 2013. Bitcoins’ supply continuously grows until 2140, stopping at 21
million Bitcoins. Furthermore, cryptography plays a key role in Bitcoins. Every Bitcoin has a
unique, encrypted number that only a Bitcoin operator can decrypt. A person opens an account
or wallet and can buy Bitcoins from online vendors. A person can store his Bitcoins on his
computer or cellphone or use an online wallet.
A person does not have to reveal his identity. Then he or she settles transactions by sending
the other party his Bitcoin information. As a buyer completes a transaction, software encrypts
that person’s private key into the transaction along with the Bitcoin number. A private key is
like a person’s bank account number. Ensuring people do not spend the same Bitcoin for
multiple transactions, a miner completes the transaction. A miner decrypts the transaction and
records it in a ledger. Then it re-issues the Bitcoin to the seller. A miner can earn transaction
fees and receives newly created Bitcoins by clearing transactions.
Miner is not the proper terminology. A miner functions as a clearinghouse. A
clearinghouse can be a large bank that helps member banks transfer money between them. Then
member banks have accounts at the clearinghouse. For example, you buy $500 in clothes from
an internet store and send a check to the seller. Next, the seller deposits the check into his or her