What is Bitcoin?
Bitcoin is a digital currency that is supported by P2P network of computers across the internet that acts as servers to process financial transactions of this currency. Simply put, Bitcoin is a digital token that can be sent electronically from one user to another regardless of where they are in the world. It is a way of making or receiving payments similar to PayPal, Skrill, and other online payment methods. The total quantity of bitcoins is capped at 21 million. There is no one person or company that runs the Bitcoin network unlike other traditional payment networks such as Mastercard, PayPal, or Visa. Instead, networks of computers all around the globe keep track of all Bitcoin transactions – similar to how the internet itself works.
Since there is no central authority governing it, Bitcoin is able to run outside of any government control or company. Some people believe that Bitcoin is a scam or a Ponzi scheme. On the contrary; once you understand what it is and what it has to offer, it is clear that this worldwide currency is for real. Bitcoin is how the future of money might be like.
Bitcoins share quite a few similarities with other currencies; they can be traded for good or services, they can be used by both retailers and individuals, and they can be used both online and offline. It was created back in 2009 and since then, this currency’s transactions are made with no middle men – meaning no banks are involved. It is becoming more and more popular each day. You can be able to purchase your meals, subscribe to an online dating service, or even do your grocery shopping online with bitcoins.
How much is a Single Bitcoin Worth?
To answer this, I would like you to think of bitcoins as gold. The prices fluctuate constantly and are determined by open market bidding on exchanges. Bitcoin’s value is similar to this. The value fluctuates constantly and is determined by bidding on Bitcoin exchanges. Since 2009, the value of Bitcoin has been rising steadily. By 2013, the price of one bitcoin had risen to $1,242 and has recently hit a high of $2,000. Do note that the prices rise and fall in extremely volatile manner making it near impossible to estimate how much a bitcoin will be worth after a couple of hours. Taking the example of gold as mentioned earlier, it is incredibly hard for us to estimate the value of it at any one point. But one thing that we know for certain is that its value is driven by scarcity. Using this trail of thought, it is clear that bitcoin’s value is also driven by scarcity and since it was stated that only 21 million coins would ever be created, the more sparsely they are spread all over the world, the more valuable they become.
This crypto-currency is a product of modern technology and many people have had issues wrapping their heads around having to purchase something that is not tangible. The one great thing about this crypto-currency is the fact that it is a global currency with a traceable system. It cannot be forged nor can it be stolen as each bitcoin has a unique data stream that supports it. This currency can be used to buy merchandise anonymously. Since this worldwide currency is not tied to any government, country or regulations, international money exchange is incredibly easy and cheaper. It also provides a good saving platform for small businesses as they will be freed from credit card fees. We have already seen bitcoins become increasingly popular in the black market since it’s untraceable. Real-world transaction is now slowly catching up and we foresee Bitcoin becoming a global digital currency for the future.
How Do I Get Bitcoins?
Unlike dollars or Euros, bitcoins as mentioned earlier are not backed by any government body. This means that they are not linked to any issuing authority or any sort of central banking system. This currency is available online and driven by mathematics and ingenious encryption protocols. If you wish to use this digital currency for your online transactions, you first need to purchase bitcoins – this can be done either through your credit card, your bank account or even with cash. Once purchase is made, you will receive your bitcoins directly into your Bitcoin account. Once you have them in your account, you can use them to directly send or receive payments directly from a buyer without any go-between such as credit card companies or banks. For you to start accepting this digital currency, you will need to create a Bitcoin address. This is relatively easy to do as you only need to log on to bitcoins website and register – it can be done anonymously by just about anyone with internet access.
Where do You Buy Bitcoin?
There are companies in most countries that sell Bitcoin in exchange of the local currency. In the United States, Mt. Gox is the largest bitcoin exchange platform that allows people to buy or sell bitcoins using different currencies. Another popular platform is Coinbase. It is among some of the most popular companies that deal in such transactions. All you need to do is open an account with Coinbase and the company will then link to your bank account and sells the coins to you in exchange for dollars. Opening a Coinbase account is similar to opening a bank account – do keep in mind that you will be required to verify your identification. For anyone wishing to remain anonymous, we would recommend that you take a look into localbitcoins.com. This website connects local buyers and sellers to each other in exchange for cash.
Individuals also have the capabilities of transferring their bitcoins to someone else. People can easily send bitcoins to each other using their laptops or mobile devices. It’s actually very similar to how one sends money digitally.
Mining for Bitcoin?
Say you would prefer to find another way to acquire bitcoins without having to buy them. Bitcoins can be mined by powerful computers that complete complex math problems. How this works is people compete to “mine” bitcoins using their computers to solve math puzzles. This is actually how bitcoins were actually created. Bitcoin uses are infinite; however, its structure remains concrete and open source. However, the value of each Bitcoin is disputable. When more and more people log their laptops on to “mine”, lesser and lesser bitcoins will be available. In theory, Bitcoin mining becomes harder and harder. This means that it now takes more and more energy (power from your computer) to process math puzzles and solves the blocks of data.
Therefore, when it comes to mining, the value of a Bitcoin may be related to the price of energy consumed and the cost of maintaining this network. If you think about it, it only makes sense that since there are more and more computers been added to the network daily, the workload on the initial nodes should ease. From here, we can perhaps speculate that the price of bitcoin will increase exponentially over time. Especially since power costs will only rise in the future.
Recently, specialized computers and mining PC’s are becoming available to individuals from companies such as Butterfly Labs and many other companies which harness ASIC (Application-specific integrated circuit) technology. These machines will dominate all others and render most other PC’s worthless as they have been specifically designed for one task only; to mine Bitcoins up to 50 GB/s. Whether these machines are real or a scam is yet to be known. However, if they are legit, the individuals who already pre-ordered will dominate the Bitcoin market. Currently, a winner is rewarded with 25 bitcoins approximately every 10 minutes.
Currently, there are 21 million Bitcoins created but the way they are becoming increasingly popular, I have a feeling that they will rise in quantity. This is because most people who have already acquired some bitcoins and not reselling them or using them but they are merely hoarding them waiting for the day they will become more valuable for resell. This is typically what happens with gold as well. Within no time, there simply won’t be enough digital currency to go around and not enough work or transaction data for the increasing number of miners each day. We can only speculate as to what will happen but for now; it is a good idea to mine and or purchase bitcoins as they will be the future financial currency acceptable worldwide.
How Do I Store my Bitcoins?
To simplify it, think of how your money is stored on PayPal. It is technically a virtual bank account that allows you to have access to your money (send or withdraw) at anytime. The major difference is that with Bitcoin, there is no third party or fees required for the transaction to be successful. Bitcoins are stored in a digital wallet which only exists on a user’s computer or in their personal cloud. This virtual wallet will be able to receive bitcoins from another person. You will also be able to send this digital currency to another individuals Bitcoin wallet. You will be able to pay for goods and services or even opt to save your money just as you would in a traditional bank setup. However, unlike owning a bank account, your bitcoin wallet is not insured by the FDIC. Some major drawbacks to storing your bitcoin wallet in your cloud is that it can get hacked and your coins can be stolen. However, storing them on your home’s computer can deem tricky as you might delete them by mistake or viruses might destroy them.
Is Bitcoin safe to use?
This worldwide currency has become a favorite amongst drug dealers, hackers and people involved in illicit activities. This is because each bitcoin transaction is mostly anonymous. Granted each transaction is recorded, all names of buyers and sellers remain concealed and hard to trace. This means that people can trade just about anything under the anonymous cloud and tracking anything illegal back to them is near impossible. As mentioned, all transactions are recorded on a public ledger called a “blockchain”. Financial authorities and law enforcement can access the blockchain and use it to track criminal transactions.
However, the problem with using this type of currency is the fact that criminals can opt to not associate their true identity with their bitcoin address. When this happens, the trail runs cold and there is no way for the authorities to track down the criminals. To make it harder, there are some Bitcoin laundering services known as tumblers. Tumblers tend to mix transactions together in order to make it extremely hard for authorities to track down a single transaction. Most American exchanges require an individual to register with their real-world identity. However, this is still not the case in most countries worldwide.
Who Created Bitcoin?
Your guess is as good as ours. Bitcoin was first introduced back in 2009 by an anonymous created known only as Satoshi Nakamoto. There have been several people who have been identified as the creator of Bitcoin but up to date, not one has been confirmed or taken ownership of creating this worldwide digital currency. After Bitcoin was introduced in 2009, Satoshi was said to have disappeared completely from social medial two years later. This person – he, she, or they – now has no authority or control over Bitcoin. The search for Bitcoin’s creator continues.
This crypto-currency is quite a fascinating concept. Sending and receiving bitcoins is as easy and fast as how you normally send out an email. You can use your computer or your smartphone to complete the transaction. The concept behind Bitcoin is relatively simple and easy to understand and by cutting out the middle man, you will pay far less during transactions. Each party involved also has the ability to maintain anonymity if they so wish. Simply put; Bitcoin has provided individuals with an easy and untraceable way to conduct business. Whether this is a good thing or not; all we can do is wait and see.
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Tony Lee Hamilton