Digital Currency Payment

Digital currency can be used to buy products or services across great distances, or in a person-to-person direct transaction at an ordinary store. Transaction fees are usually extremely small or nonexistent. To begin using a virtual currency, a person needs to get a virtual wallet. This is software that runs on a person’s computer or smart phone. Your wallet contains a set of encrypted credentials that identifies you when you use digital currency. If this system sounds complicated, it is. Together with its many advantages, it harbors certain dangers. To navigate around its pitfalls, consider consulting Bitcoin attorney Roger E. Naghash, who serves clients across the state of California and the rest of the nation from his Orange County office.

If you are using a computer or smart phone to create a digital wallet, it will need to download and install the latest copy of the block chain ledger. This is the encrypted ledger that records transactions. It lists every transaction, no matter how big or small, that has ever occurred within the Bitcoin network.

Since this ledger is very large and encrypted with a powerful formula, the download and installation process can be slow. But this step is crucial, and your virtual wallet will not work without it. The complete ledger provides a record that is important for security. It shows whether the Bitcoin that someone is about to transfer to you is genuine.

After setting up the wallet, a person needs to acquire currency to put in it. This usually involves transacting with a “digital exchange,” a company that will trade your virtual currency for cash, or vice versa. You send cash or some other transfer of money to the exchange, and it transfers Bitcoin to your wallet. The transaction is recorded to the block chain ledger using a long series of numbers and letters. Your name is not directly used.

Your virtual wallet stores an encrypted credential that identifies you for each purchase you make. You can transact online by finding a website like TigerDirect.com that sells items for digital currency. Once you select an item to buy, you are sent to the checkout page, and you can simply copy your wallet credential and paste it into the website’s online form.

You also may be able to transact in person. Perhaps a coffee shop near you accepts Bitcoin. Your mobile phone can generate a QR code that can store your account information visually. A symbol of dots will display on your phone’s screen, identifying you for the purchase. The vendor can use their own device to take a picture of that image. It is somewhat similar to swiping your credit card at a store checkout.

In either case, the transaction moves digital currency behind the scenes similar to the way a bank card transaction works. The purchaser is identified, the store is identified, an amount is agreed upon, and ledger records are changed to indicate that the amount has been transferred.

The system gives digital currency users a degree of anonymity. It can be easy to conceal your identity for privacy purposes. However, your true level of anonymity depends on how much you are willing to go out of your way to keep your name off all transactions. For example, if you purchase from Tiger Direct, your name and address may be tied to your transaction because Tiger Direct needs to ship the product to you.

Some people welcome the anonymity that virtual currency can provide, since our digital society seems to continuously erode privacy. When there is a dispute about a transaction, however, anonymity can make the matter more complicated to resolve. A handful of people use this system to conduct illegal purchases. Just like cash, digital currency can be used to buy ordinary items, or it can be used to get drugs, weapons, or other illegal items.

Whether you are facing a contract dispute, a regulatory compliance concern, or a criminal prosecution related to virtual currency, you will need capable legal advice. Based in California, Bitcoin lawyer Roger E. Naghash has broad experience in the law relating to digital currency transactions as well as a practical understanding of how these currencies work. Contact our Southern California office today by calling 949-955-1000, or use our contact form to start a conversation with us.