It is clear that the digital currency Bitcoin has become one of the most talked about topics currently, and although it is a popular term in circulation around the world, Bitcoin is still a mystery to many. Therefore, in this article, we plan to drop any mysteries and clarify everything that might be going through your mind regarding Bitcoins.
Bitcoin is a wonderful and complex currency and it is a reflection of this current information age, as it exists only online and allows the user to be somewhat anonymous.
If you haven’t heard of Bitcoin before, you might think it sounds a bit mysterious. However, fear not, because we are here to try to dispel this theory and answer some -if not all- of your questions about Bitcoins.
Bitcoin is a currency designed to pay for goods and services, just like the euro or the US dollar, but at this point, the similarity ends.
What is the difference between Bitcoins and traditional currencies?
Bitcoin is characterized by decentralization as no government or central bank controls the supply of currencies.
It has a limited availability digitally, as there are no “physical” Bitcoin banknotes or coins or even bills for them, as the currency exists entirely online.
The currency operates according to a system that works without a central warehouse or a single manager, meaning that it differs from traditional currencies by the absence of a central regulatory body behind it. Transactions are carried out on a direct network between users without an intermediary through the use of encryption. These transactions are verified by a network and recorded in a general distributor ledger called the Blockchain for depositing or withdrawing funds to and from the exchange or wallet.
Who created Bitcoin?
Bitcoin was initially introduced as an open source program by an anonymous programmer, or a group of programmers, under the pseudonym Satoshi Nakamoto in 2009. There have been many rumors about the true identity of the creator of Bitcoin, but all of the people mentioned in these rumors have publicly denied that they are Nakamoto.
Nakamoto himself had once claimed that he was 37 years old and lived in Japan. However, due to his/her fluent English and the lack of programming description in Japanese, there are reasonable doubts about this claim. Around mid-2010, Nakamoto turned to other things, leaving Bitcoin in the hands of a few prominent members of the Bitcoin community. In fact, Satoshi appointed “Gavin Andersen” as the lead developer.
It is estimated that Nakamoto owns around one million bitcoins, which is worth around $ 3.6 billion as of September 2017.
Who controls Bitcoin?
According to Gavin Andersen, the first thing he focused on after Nakamoto left the project was more decentralization. Andersen wanted Bitcoin to continue to exist independently.
For a lot of people, the main advantage of Bitcoin is its independence from banks, companies, and world governments. No single authority can interfere with Bitcoin transactions, charge transaction fees or steal people’s money. Moreover, the Bitcoin movement is very transparent – every transaction is stored in a widely distributed public ledger called the Blockchain.
Basically, while Bitcoin is not controlled as a network, it does give users complete control over their money.
How does Bitcoin work?
Behind the scenes, the Bitcoin network shares a public ledger called a “blockchain”. This ledger contains every transaction that is processed at any given time. The digital records of transactions are then merged into “blocks”.
If someone tries to change just one letter or number in a group of transactions, it will also affect all of the following blocks. As it is a public ledger, any mistake or attempt to cheat can be easily monitored and corrected by anyone.
User wallet can validate each transaction. The authenticity of each transaction is protected by the digital signatures corresponding to the sending addresses.
Due to the verification process and depending on the trading platform, Bitcoin transactions may take a few minutes to complete. The Bitcoin protocol is designed so that each block takes about 10 minutes to mine.
One of Satoshi Nakamoto’s main goals when creating Bitcoin was the network’s independence from any governing authorities. It is designed so that every person, every company, as well as every machine involved in mining and verifying transactions, becomes part of a vast network. Moreover, even if one part of the network fails, the money will continue to move.
These days banks know almost everything about their customers: credit history, addresses, phone numbers, spending habits, etc. And all of this is completely different with Bitcoin, since the wallet does not have to be linked to any personally identifiable information. And while some people simply do not want their money to be censored and tracked by any kind of authority, others may argue that drug trade, terrorism, and other illegal and dangerous activities will thrive on this relative anonymity.
Bitcoin’s anonymity is only relative, as every Bitcoin transaction that has ever occurred is stored on the blockchain. In theory, if your wallet address is publicly used, anyone can know how much money is in it by carefully studying the blockchain ledger. However, tracking someone’s Bitcoin address remains nearly impossible.
And those who wish to remain anonymous with their transactions can take measures to remain undetected. There are certain types of wallets that prioritize opacity and security, but the simplest measure would be to use multiple addresses and not move massive amounts of money to one wallet.
The Bitcoin network processes payments almost instantly, and it usually only takes a few minutes for someone on the other side of the world to receive the money, while regular bank transfers can take several days.
Once you send Bitcoin to someone, there is no way to get it back, unless the recipient wants to send it to you again. This ensures payment is received, which means that whoever you trade with cannot defraud you by claiming that they did not receive the money.
What can I buy with Bitcoin?
In 2009, when Bitcoin was first introduced, it wasn’t very clear how and where it might be spent. But now, you can buy almost everything with it. For example, giants such as “Microsoft” and “Dell” accept Bitcoin payments for a variety of their products and digital content. You can also fly with airlines such as Airbaltech and Air Lithuania, or buy theater tickets through Theater Tickets Direct in the United Kingdom.
Other options include paying for hotels, buying real estate, getting bills at various restaurants, joining a dating site, buying a gift card, placing a bet in an online casino, and donating to a cause you support. There is also a range of diverse online markets, trading in everything from illicit items to high-end luxury items.
Bitcoin is a relatively new and very sophisticated way to pay, so it is natural that spending options are still limited, but every day more and more companies – from small local cafes to industry giants – begin to accept Bitcoints as a payment option.
Moreover, due to the constant fluctuation of the exchange rate, Bitcoin has become a great investment opportunity. Although it is still an unstable and somewhat unrecognized currency, it has become more valuable over the past year, reaching $ 20,000 per bitcoin.
How to obtain Bitcoin?
The simplest way to obtain Bitcoin is to buy it. Bitcoin is available from various exchanges, but you can also buy it directly from others via the Bitcoin markets. You can pay for it with cash, credit and debit card transfers, or even other digital currencies. But first, you’ll need a Bitcoin wallet.
There are a variety of options, but the main ones can be identified in an online wallet and a wallet program on your computer’s hard drive. Neither option is completely secure, as a hard drive can become corrupted, while an online wallet may be vulnerable to hacking. There are also mobile wallets, which are very simplified due to the massive storage capacity required to carry the entire blockchain. There are also dedicated devices called wallets with two QR codes that are not stored digitally anywhere, making them safe from regular cyber attacks and hardware failures.
And, of course, there’s mining. A few years ago, anyone with a powerful enough computer could mine Bitcoin, but that isn’t the case anymore. The growing increase in Bitcoin’s price, as well as its exchange rate, has caused large companies to join the arena, equipped with mining hardware, which is why the level of difficulty and energy required to mine a valuable amount of Bitcoin has increased. What’s more, the amount of Bitcoin that has not yet been mined is constantly and drastically decreasing.
Bitcoin was designed with freedom in mind. And most importantly, freedom from the ruling authorities controlling transactions, imposing fees, and controlling people’s money. When it comes to buying things, digital currencies have become just as legal as regular currency in recent years, and given that there are so many deep markets on the Internet that only accept Bitcoin, you may be able to buy some things more easily with Bitcoin compared to any other currency.
One of the distinguishing characteristics of the money is portability, meaning that it should be easy to carry and use. And since Bitcoin is completely digital, in terms of currency, any amount of money can be carried on a fast drive or even stored on the Internet.
And digital currencies give people the freedom to send and receive money with just a scan of a QR code or a click of an online wallet. It only takes little or no time, there are no exorbitant fees and money goes from person to person without any unnecessary middleman; All you need is an internet connection
Another indisputable feature of the Bitcoin network is the ability to choose the amount of the transaction fee, or choose not to pay it at all. The transaction fee is received by the miner, after creating a new block with a successful hash. Usually the sender pays the fee in full, while deducting this fee from the recipient can be considered an incomplete payment.
Transaction fees are completely voluntary and act as an incentive for miners to ensure that the special transaction is included in the new block being generated. This incentive also acts as a source of income for miners, often giving them more money than traditional mining, especially given that the mining activity will stop completely in the future, when the maximum limit of Bitcoins is reached.
Thus, the cryptocurrency market is asking users to choose between cost and wait time. And higher transaction fees may mean faster processing, while users without any time restrictions can save money.
There are no payment cards
Payment cards such as credit, debit and prepaid cards, e-wallets, automatic teller machines, point of sale cards, and their associated companies. They are made up of all the organizations that store, process, and transmit cardholder data, there are strict security regulations in place and most major card brands are a part of it.
While uniform rules and regulations can be good for large companies, they may not take everyone’s needs into account. And when using Bitcoin, there is no need to comply with industry standards for payment cards, which could allow users to expand into new markets, where credit cards are unavailable or levels of fraud are unacceptably high.
As a result, users get lower commissions, along with an opportunity to expand their markets and reduce their administrative expenses.
Safety and control
Bitcoin users are able to control their transactions; and no one can withdraw money from your account without your knowledge and consent, as sometimes happens with other payment methods. And no one can steal your salary information from merchants either.
Bitcoin users can also protect their money with backups and encryption. Moreover, their identities and personal information are always protected, as they are not required to be disclosed to make any payments.
Transparency and neutrality
Every single transaction as well as every single bit of information on the subject is always available to everyone in the Blockchain network, which can be verified and used in real time. The Bitcoin protocol is encrypted, which is why no human or organization can control or manipulate it. The network is decentralized, so no one can fully control it. That is why Bitcoin will always be neutral, transparent, and predictable.
It cannot be fake
One of the most popular methods of fraud in the digital world is to use the same money twice, making both transactions fake. This is called “double spending”. To counteract this, Bitcoin, just like most other digital currencies, uses blockchain technology, as well as the various consensus mechanisms built into all Bitcoin algorithms.
Bitcoin legal status varies greatly from country to country. In some countries, the use and trading of Bitcoin is encouraged, while in others it is prohibited and forbidden by law.
There have been a lot of concerns about Bitcoin attracting criminals, and some media outlets have even reported that its popularity is due entirely to the ability to spend it on illicit goods. And indeed, when the infamous “Silk Road” black market closed, Bitcoin did, in fact, instantly plummet in value.
Bitcoin is accepted and is completely legal in a lot of countries, but some governments in the world still do not have any regulations regarding Bitcoin, while other countries have explicitly banned it.
And the majority of business firms, no matter how big or small, are still quite vague. So it is nearly impossible to abandon all other currencies and start using Bitcoin exclusively.
The key is a unique alphanumeric password necessary to access a Bitcoin wallet. Mainly, losing this key means losing your wallet. However, most current wallets have backup and restoring mechanisms, but a user needs to set them up before they can use them.
Bitcoin’s price has suffered from ups and downs, going through various cycles of massive highs and then lows, which some refer to as bubbles and recessions. Throughout its history, Bitcoin has managed to hit new highs, only to drop dramatically right after it. Its value is also unpredictable, and it changes quickly and dramatically, which can cause significant financial damage to any reckless investor.
The future of Bitcoin is somewhat unclear. At the moment, governments and banks are unable to control Bitcoin, and they are considered nearly unregulated. However, as it grows and becomes more popular, more governments in the world try to put it under control. However, the regulated Bitcoin would be a completely different type of currency.