03 Nov What Is Bitcoin?
What Is Bitcoin?
According to CNN Tech, “Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name. More merchants are beginning to accept them: You can buy webhosting services, pizza or even manicures.”
Bitcoin.org defines bitcoin this way: “Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence.
Since bitcoins aren’t the official currency of any one country, there is no government treasury department printing them. As CNN Tech explains, “People compete to ‘mine’ bitcoins using computers to solve complex math puzzles. This is how bitcoins are created.”
“With paper money, a government decides when to print and distribute money. Bitcoin doesn’t have a central government,” Bitcoinmining.com reports. “With Bitcoin, miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine.”
Once bitcoins have been issues, they can be acquired as payment for services rendered or for goods purchased. You can also buy bitcoins on an exchange.
There are many reasons for the increasing appeal of bitcoins. The anonymity makes them attractive to some. Bitcoins are also not controlled by any specific country or government, so there are no tight controls. It’s also important to note that that international transactions can be facilitated by using bitcoins. Bitcoins are universal.
And, as CNN Tech points out, “Some people just buy bitcoins as an investment, hoping that they’ll go up in value.”
Bitcoin investment is an exciting and groundbreaking new opportunity for investors. It’s attracted enough attention to earn a nickname – bit vest! Among the various investment possibilities this cryptocurrency offers are a bitcoin IRA or bitcoin 401K.
Bitcoin.org has put a little more effort into defining the advantages of using bitcoins. Among the many benefits touted on the website are:
- Payment freedom – It is possible to send and receive bitcoins anywhere in the world at any time. No bank holidays. No borders. No bureaucracy. Bitcoin allows its users to be in full control of their money.
- Choose your own fees – There is no fee to receive bitcoins, and many wallets let you control how large a fee to pay when spending. Fees are unrelated to the amount transferred, so it’s possible to send 100,000 bitcoins for the same fee it costs to send 1 bitcoin.
- Fewer risks for merchants – Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects merchants from losses caused by fraud or fraudulent chargebacks, and there is no need for PCI compliance. Security and control – Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.
- Transparent and neutral – All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and predictable.
Bitcoin.org also admits that there is a downside to using the cryptocurrency. The most obvious one, of course, is the degree of acceptance. Currently, there aren’t many places where you can spend bitcoins. But, as Bitcoin.org points out, “Every day, more businesses accept bitcoins.”
Volatility can also be a drawback. Since there aren’t a lot of bitcoins and only a small number of businesses using them, the price can be affected by relatively small transactions. “In theory, this volatility will decrease as Bitcoin markets and the technology matures,” Bitcoin.org says.
“In general, Bitcoin is still in the process of maturing,” the website concludes.