What is Bitcoin?
Bitcoin (BTC) is one of the strongest cryptocurrencies that was released in 2009 by Satoshi Nakamoto. However, it was in 2013, when this software-based currency took over the world, as its value increased to over 300% in a span of one year. Soon, in the succeeding year, it improved to 400%, creating an overall cap of $7 billion. There is no form of physical balances maintained in BTC, rather these are kept in public ledgers along with other associated bitcoin transactions. Despite of not having leader tender, it has acquired immense popularity and at present plans to launch another range of virtual currencies which will be known as Altcoins.
How Bitcoin Works?
More than a currency, bitcoin can apparently be defined as software. This is because the funds are completely digital and follow a set of processes and protocols. Now, bitcoin runs on a protocol that is termed as blockchain. In 2008, in a paper Satoshi Nakamoto described both bitcoin and blockchain, and for some time these two terms were perceived to be synonyms. After that, the application of blockchain revolutionized the essence of cryptography, after which thousands of similar currencies have been created using the same technique, but none of them were able to make an impactful presence as bitcoin.
This leads to the one question that people often have in their mind- what made bitcoin so popular, or what made it different from the rest? The following points explain them all:
- Bitcoins were introduced as a form of equity investments. It’s market value experienced an enormous swing in cap and value
- This by far stands to be a promising cryptocurrency traded across different markets. So, basically, it is accepted and recognized as a form of currency
- It works in a decentralized market and is quite limited, and most importantly it is difficult for the government to monitor or tax bitcoin. Unlike the paper currency produced by central banks, there is a specific cap setup on the total value of bitcoin and this limits the devaluation of currency under the influence of inflation.
- These are more of a social community, where there is an active network of members who act just like any other social media platform.
Making The Most of Bitcoin
Bitcoin is a form of peer-to-peer technology that helps in instant payment. The companies or individuals who have the authorized computing power become a member of the BTC network. They are denoted as miners who are rewarded with lower transaction fees and new bitcoin. The miners can be considered as the governing power that enforces credibility on the network, the new coins that come to the miners have a fixed yet periodic declining rate. For every one bitcoin that can be divisible by eight places of decimal, and this is the smallest unit called Satoshi. If required, and the miners accept the changes, then coins would be divisible to 8 more decimals.
Mining is an important process in which the new bitcoin releases become a part of the circulation. This involves, solving a computationally coded puzzle so as to discover a block and then gets added to the existing blockchain. Initially, when bitcoin came into existence participants received 50 coins as block reward, but this tends to decrease in four years. With the creation of more bitcoin, the mining process becomes as difficult as it can get, where the amount of computing power increases.
In 2017, the mining difficulty is about 4.2 billion, the worth of one coin is approximately $1,223. The bitcoin price is also based on the size of mining network. as with larger network miners would find it difficult to exact more coins. Because of this, bitcoin expanded, as the power of network aggregate tripled in one year. The coins acquired by miners are stored in a digital wallet, which is present either in the computer or the cloud. This wallet acts like a form of virtual account that enables the user to receive and send bitcoins, save money or pay for their goods. Unlike accounts, these wallets do not come under the insurance cover of FDIC.
Benefits of Using Bitcoins
The bitcoins that you mine using the computer though the process of complex algorithms or buy using national standardized currency and have them in the wallet can be accessed through a desktop or other mobile devices. There are several benefits of using these coins for trading, purchase or payments and they are:
Absence of Third-Party Interruptions
Well, one of the most amazing benefits of bitcoin is that there are no financial institutions like banks or other intermediaries’ part of the process. This is because they have no way to trace the transaction of freeze the bitcoin wallets. The system is 100% peer-to-peer where you get complete freedom than other national currencies.
Every purchase or trade made with bitcoin is discrete. Unless the user voluntarily discloses the transaction, the purchases are not related to personal identity as in case of conventional cash payments and as stated before they cannot be monitored or tracked. Moreover, the particular address formed during user transaction changes every time.
Low Transaction Fees
The foreign purchases or wire transfers come with exchange costs and fees. While when you buy bitcoin and use them for performing transactions then there are is no involvement of government or other institutions, thus the cost of transaction fees are extremely low. This can be of huge benefit for the travelers, and in addition to that the transfer of bitcoin takes place quickly and this eliminates the hassle of wait periods or authorization requirements.
None of the transactions denominated in bitcoin can be traced, because of which third parties will not be able to intercept the transactions, and due to this there is no sales tax added to any purchase made through BTC, with this you ultimately get the goods or service that you want without having to pay any taxes for the same.
Similar to other mobile payment systems, the bitcoin wallet gives you the liberty to make payments anywhere you have access to internet connection. This means you would never have to travel to a store, bank for getting products of your choice. And most importantly, there is no personal information or anything associated with the bitcoin account necessary for the payment.
If the present trends remain intact then the proximity and value of bitcoins are sure to increase with time. This is the reason, why it stands to be an integral topic for venture capitalists and investors, who believe that it is here to stay. For a beginner, there are innumerable ways to invest and without a doubt, buying bitcoins has become one of them.