Money and its evolution has been a slow process. Though nowadays we have the plastic money and online banking but still the essence of money is still to facilitate transactions. The issuance of new currency is monopolized by the government rendering the citizens not with much of a choice regarding what currency to use, recently a new type of currency or rather money came into existence which was in the virtual form.
The first paper ever published on Bitcoin was done by Satoshi Nakamoto. He articulated the idea of a network encrypted virtual currency which won’t be under the monitoring of any central authority. A year later, he mined the first block of Bitcoin and started a huge revolution in the cryptocurrency world.
Here in this article you will discover all the cool things about Bitcoin. Why is it so unique and what in the world makes it so valuable. You will know how the world of Bitcoin works.
Why Bitcoin Is A Cryptocurrency
Bitcoin is basically a cryptocurrency. The question that arises now is that what exactly is a cryptocurrency.
Cryptocurrency is a currency in digital form under which encryption techniques are put in order to regulate the generations of units of currency and verify the transfer of funds thereby operating independent of a central bank.
So Bitcoin is one of the cryptocurrency i.e a virtual currency which came out under the major public eye after its price rose to $13000 in the beginning of year 2018. Bitcoin is an innovative product a digital asset which if accepted globally will change how we transact in our day to day life.
One great offering of Bitcoin is that the transaction fees is much lower than other traditional online payment methods. The second major advantage Bitcoin is that it can be stored offline on a persons local hardware (cold storage) this method protects the currency from being taken by others.
Why Bitcoins Are So Valuable ?
With a dedicated following of millions of people the digital Bitcoin currency is a regular headline maker thereby attracting many investors to make Bitcoin as a part of their investment portfolio. Even after so much of belief Bitcoin has of the common people the government is yet to decide if or even consider deciding if to back it somewhere in the future or not neither does it have any backing of any third party like a bank.
The question arises now is that if there is no government backing then from where does the Bitcoin derives it value from.
In simple economics term anything that is demanded or wanted by the general public becomes important and valuable similarly bitcoins are valuable because people want them. Like any other currency bitcoins follow the same rule of demand and supply.
Currencies have always been a source of exchange thereby making trade easier and making everyone get whatever they want at the end of the day. While the normal fiat currency derive their value from the backing of the government, currencies like gold and diamond are valuable because of themselves.
As of now Bitcoin isn’t like other currencies as it is not accepted universally. Bitcoin cannot be used as a currency but it can be very much used as a store of value i.e as a placeholder for the goods and services that they can be exchanged for just as with the traditional currencies. There are definitely limits for what it can be used for and what it cannot be used for.
Thereby comes the value of Bitcoin in the essence of the fact that despite the missing of official backing or wide acceptance many people are willing to accept it and trade with it. It has created its own huge ecosystem with players of different level.
Moreover it, completely overpowers the traditional method of doing digital transfers and its use in across border transfer complicated payment arrangements involving multiple dates, accounts, and conditional payments can be made using the technology behind bitcoins easily. Bitcoin is technically the smart money which makes the complicated procedures as easy as possible.
(the reason being that Bitcoin does not uses the third party to validate online transactions thereby making it cheaper and the technology used behind the Bitcoin makes the security of the transaction maximized)
A major benefit of Bitcoin is known as “Censorship Resistance” as it has the ability to facilitate the transactions which are not normally allowed by the other traditional payment methods.
Why So Controversial
Since the invention of Bitcoin it hasn’t been so popular but the various recent events turned Bitcoin into the talk of the town as the money is untraceable many criminal leaders in the recent years used bitcoins as a storage of their money value in order to hide it from the government thereby the increased demand of bitcoins led to the skyrocketing of the value of bitcoins.
The cryptocurrency world is full of scams as it is the best way to hide money from the eyes of law. The bitcoins have the power to take away the power from the government for the issuing of money and it gives the power of issuing money to the general public. On top of that Bitcoin accounts cannot be frozen or examined by the tax inspector thereby making them completely out of the hand of law and highly highly controversial.
How Is A Bitcoin Created
Bitcoins are created by the complicated method of Bitcoin mining. The Bitcoin process involves commanding your home computer to be on 24*7 and to work on “Proof Of Work” problems (computationally intensive math problems) each of these Bitcoin problems have a set of possible 64 digit solutions. One Bitcoin problem can be solved within 2 to 3 days.
A single computer might make 50-70 cents USD a day
35 computers working together might make 500$ a day.
Bitcoin mining when done with large number of computers can be profitable.
How Bitcoins Work?
Bitcoins are the virtual currency and are designed in such a unique way that they contain their own value. They posses value and trade just as if they were nuggets of gold. Its your choice either to spend your Bitcoin to buy something or to keep it and wish for its value to increase with each passing day.
A personal wallet is used in order to trade from Bitcoin (A wallet is a small personal database that you store on your hardware (cold storage) or online on cloud, smartphone (hot storage).
How Bitcoins are Tracked?
A Bitcoin holds a very simple data ledger file called a block-chain. Each block-chain is unique to each individual user and his or her personal Bitcoin wallet.
The public ledger contains all Bitcoin transactions thereby preventing fraud and providing authenticity. This process helps to prevent the duplication of bitcoins.
While every wallet address is recorded by the Bitcoin but still it does not record the details about the owner of the Bitcoin thereby implying that every Bitcoin transfer is confirmed digitally but is completely anonymous at the same time.
So basically the thing is that your identity is hidden while making a Bitcoin transaction but the history of your wallet can be identified. This phenomenon of Bitcoin somehow prevents people from using Bitcoin for illegal purposes.
Three Facts about Bitcoins
1. Is payment the reason people buy Bitcoin?
Well I myself have referred to Bitcoin as a digital currency many times in this article and what is a currency used for making payments right? But Bitcoin is rarely used as a payment method.
Though it is used quite a few time as payment method in certain complicated situations but it is not widely used for it. People don’t buy this digital currency for making payments they rather buy it as an appreciating asset whose value will increment in the upcoming days. For instance if I ask you to buy coffee you wont give me your apple shares in exchange right well the same goes for bitcoins. People don’t buy them to spend but to keep and feel rich at the same time.
2. DIGITAL GOLD
Bitcoins in today’s world have the utility of digital gold. This fact about Bitcoin is the major reason people want to possess it. Bitcoin is like a scarce asset nearly impossible to confiscate with no government involvement that to every common man is attracted to.
People are so engrossed in order to buy this online digital gold that they would go far just to possess some unit of this appreciating asset .
3. Bitcoin Transactions Are Irreversible
THE conventional payment methods like a bank draft , personal check, credit card charge or wire transfer are all insured and reversible by the banks involved but for the bitcoins there is total different story once a transaction is made from a Bitcoin it is irreversible and if in case you lose your Bitcoin wallet from your hard-drive its gone forever and it won’t come back. So when you handle bitcoins be very prudent as it is a very risky job.
Misuse of Bitcoins
Mr. Arun Jaitley has rightly said that the government cant stop the misuse of bitcoins as there is no legal safeguards for people dealing in bitcoins as it isn’t a lawful legal tender. The terror groups and many other anti national units misuse the cryptocurrency for illegal and restricted payments. With the lack of dependence on state it works with anonymity it has its own virtual ecosystem and it is not controlled by any other third party.
Many of the hackers uses bitcoins as a method of ransoms because of the anonymity the Bitcoin provides.
How to Use Bitcoins in Daily Life or It is Impossible?
Well if you wanna buy Bitcoin as an asset it is a good yet volatile idea or if you wanna make complicated payments using Bitcoin then that is also a good idea but if you wanna buy coffee with your Bitcoin the that is next to impossible as it is not a lawful legal tender and not everybody is obligated to take it when offered .
Bitcoin is something unstoppable which is running its own different world and not everybody gets them. But the once who do will benefit the good side of them. I would like to end here with something perfectly said by the founder of McAfee.
“You cant stop things like Bitcoin . It will be everywhere and the world will have to readjust. World governments have to readjust”