Bitcoin is a form of digital currency. It is a payment system, and the currency is Bitcoin itself. Satoshi Nakamoto first created the whitepaper and original reference implementation of Bitcoin; his true identity is still unknown. Bitcoin does not rely on intermediary regulatory services like banks or governments. One of the reasons for Bitcoin’s explosion in popularity is that it is a decentralized system, i.e., not under the control of any one central organization. You’ll learn more about decentralization later in this article.
How does Bitcoin Work?
Bitcoin uses blockchain technology, which in simple terms, is a public ledger system. A ledger is an account of the transactions taking place between individual addresses. All transactions made through this system are listed in a ledger which is stored by Bitcoin users. Everyone running a node (a software wallet, for example) has a copy.
Whenever somebody makes a transaction, a new entry is made, and once this is verified by other users, the public ledger is amended, and all copies are updated. The entry in the ledger is proof that Bitcoin was sent and received.
Ordinary money is printed whereas cryptocurrencies like Bitcoin work quite differently. To create Bitcoins, a mathematical problem needs to be solved. Whenever a transaction on the Bitcoin blockchain occurs, miners will verify it before the blockchain is updated. The verification process involves creating codes using dedicated hardware and techniques, and the creation of a particular code leads to the validation of a transaction, which in turn creates Bitcoin. This process is called mining. Mining simultaneously helps validate the network’s status and creates rewards for the miners, in the form of Bitcoin. Due to the fact, a vast number of transactions happen in a brief time; the blockchain accumulates these in blocks for the miners to verify.
Why is Bitcoin Better Than Fiat Money?
There are many reasons why cryptocurrencies like Bitcoin can be a better option than fiat money:
It is Decentralized
Governments are becoming more and more Orwellian, and power is slowly being removed from the average citizen. Excessive power in the hands of the few does not bode well with many, but in situations such as this, decentralization can help. Bitcoin is decentralized. No one person owns or controls it. The developers and creators have written the code, and now the users and miners that are responsible for its validation. The Bitcoin blockchain is stored on every node, transactions and data cannot be rolled back by any corporation or individual. The records are immutable.
It is Open For All
Your bank might require you to have a particular credit rating or credibility before you can open an account with them. Even if you meet their requirements, you have to undergo a lengthy and cumbersome process to open an account. With Bitcoin, you can set up an account and start using it within minutes.
Minimal Transaction Fees
Electronic payment is not a new thing by any means. However, if your transaction involves credit card companies or other institutions, everyone wants a cut. While Bitcoin requires transaction fees to make a payment, it is generally lower than those needed for international transactions with Visa or MasterCard.
It is Fast
With Bitcoin, you can send and receive money often within minutes. This can fluctuate based on the status of the network and miners but is likely only to keep improving as Bitcoin becomes more scalable.
It is Anonymous
Bitcoin payments are anonymous. People can’t see how much money is held, how much is spent, and who it was sent to, on a personal level. This information can only be seed based on the Bitcoin Wallet address (which is anonymous). Financial institutions have all this information, and they store your entire transaction history.
6. The Ledger is Public
While Bitcoin payments are anonymous, they are also transparent. When you make a payment to someone through Bitcoin, the transaction is updated in all the copies of the ledger. This means that the entire user base of Bitcoin knows that the address you used, sent or received a particular quantity of bitcoins to or from another address.
How You Can Use Bitcoin
Bitcoin is currently the most popular cryptocurrency. This popularity is reinforced by merchants all over the world who accept Bitcoin as a form of payment in their stores or online. You can use Bitcoin to make payments to services that accept it. These services provide the necessary information in their store or on their website for you to make the transaction. It usually involves them providing a Bitcoin address and the amount, in Bitcoin, to send. They often use a QR code for their address which can be scanned by your Bitcoin wallet. Companies like Microsoft, Dell, and Expedia accept or have accepted bitcoin payments.
Where to Buy Bitcoin?
There are many places where you can buy Bitcoin. Most of these are Exchanges, which provide order matching between buyers and sellers. There are also some options for OTC (Over-the-Counter) purchasing. Read more about how to buy or sell Bitcoin in our guide here.
If you have any questions about Bitcoin, feel free to comment below. One of our staff or regular users will help answer any questions.