The Definition Of Bitcoin
Bitcoin is a digital currency that is also referred to as BTC. It cannot be used and distributed as physical currency, as it only exists electronically. There is no single person that controls it as it is decentralised and ran by a peer to peer network. There is a limit to the amount of BTC that can be created and this currently stands at 21 million.
Who First Created Bitcoin?
The truth is that no one really knows for certain who the creator is, or even if it is an individual or a group of people. Bitcoin first appeared on an open source platform when it was released by an anonymous source under the pseudonym of Satoshi Nakamoto in 2009. There have been several people that have been suspected of being Nakamoto over the years, but all of these people have denied this suggestion. There is a doubt that he is even Japanese as he does not use the language in any of his labelling and his English is perfect.
In 2010 Nakamoto moved on from the Bitcoin project and left it in the hands of a few of his trusted developers, including lead developer Gavin Andreson. It is believed that Nakamoto owns around one million bitcoin, and these would be worth over $8 billion as of May 2019.
Who Is Bitcoin Controlled By?
Bitcoin is a decentralized currency which means that it is not controlled by just one person. It has been this way since it first appeared, and Andresen took action to make it even further decentralized after Nakamoto left the project.
One of the reasons that bitcoin is so popular is that it cannot be controlled by banks or governments. This means that there are no transaction fees and nobody’s money can be taken from them in the form of charges. It is also completely transparent as every transaction that has ever been made is recorded, and a ledger of these transactions is available to the general public.
How Does Bitcoin Work?
You are only able to see the Bitcoin in your wallet and the transactions that you have made, but there is a lot more which is happening behind the scenes.
On the Bitcoin network there is a ledger called the block chain that has details of all the transactions that have ever been made. The transactions are divided into different blocks.
This helps makes the transactions very secure because if someone were to try and change something in one block, then all other blocks that came after it would also be altered. This would make it very easy to spot, and the transaction would be corrected again very quickly.
You are able to verify the validity of any transaction that you complete directly from your wallet. This means that all transactions have to be authenticated by the sender and receiver in the form of digital signatures.
Bitcoin transactions may take a few minutes to go through because they have to be verified at both ends. The way that Bitcoin protocol has been designed means that it takes about ten minutes to mine a complete block.
What Are The Main Characteristics Of Bitcoin?
Decentralized – When Satoshi Nakamoto came up with the idea of Bitcoin he wanted to make sure that it could never be controlled by banks or governments. Every person that is involved in Bitcoin transactions becomes part of the network. If one part of this network goes down, money is still able to move around the system.
Anonymous – There is a lot of information that your bank holds about you and your spending habits. This is not the case with Bitcoin as you are able to remain completely anonymous and all details of transactions are encrypted.
Transparent – There is a history of every single Bitcoin transaction that has ever taken place. However, it is very difficult to be able to trace a transaction back to an individual, and so it still remains very private.
Fast – It should take no longer than ten minutes to send and receive Bitcoin, regardless of how far apart the two parties are. With the standard banking network it can take several days for international transactions to get to your account after it has been sent.
Non-refundable – There is no way for a Bitcoin transaction to get lost in the system somewhere. This means that if you have sent money to someone it is guaranteed to get there. It prevents scams because people can’t tell you that they money you have sent has not been received.
What Can Be Purchased With Bitcoin?
The number of companies that accept payment by Bitcoin is increasing all the time. As well as small independent companies, this also includes well known names such as Microsoft and Dell. You can also use them to pay for things like hotel rooms and flights.
There are many people who choose not to spend the Bitcoin they have, but buy it as an investment instead. This is because the overall price of Bitcoin has risen considerably in the years since it was first developed. However, the price is not guaranteed to keep rising and you need to think carefully before investing large amounts of money in Bitcoin.
How Do You Get Hold Of Bitcoin?
The easiest way to own Bitcoin is for you to purchase it. They can be purchased using a debit or credit card, or via bank transfer. You will also need to purchase a Bitcoin wallet so that you can digitally store the Bitcoin that you buy. When purchasing this wallet you should do your research to make sure that it not one that is susceptible to being hacked.
Mining Bitcoin used to be an option for anyone that had a computer with a large enough processor. However, these days it is only really businesses that are able to afford computers that are big enough to cope with mining as it is not as easy as it used to be. The other issue with mining Bitcoin is that because there are only a finite amount of Bitcoin that can be created, there will come the day when mining will have to stop.
What Are The Advantages Of Using Bitcoin?
Freedom – When Bitcoin was designed, it was done with freedom in mind. This included freedom from banks having control of your money and being able to impose charges on you as well as keeping information about how you spend your money.
High portability – Bitcoin is one of the easiest currencies to move around because there is no physical currency for you to carry around. You can access your Bitcoin wallet from wherever you are in the world as long as you are able to connect to the internet.
Set your own commission – If you mine your own Bitcoin or have an excess that you want to sell on, then you are able to choose your own commission rate when you sell it on. There is no standard rate of commission across the industry so you are able to set your own rate. You can even offer discounts to customers as a loyalty bonus if you choose.
No need for PCI – The Payment Card Industry, or PCI, control every payment that is made from a credit or debit card, as well as cash that is withdrawn from ATMs. Bitcoin does not use any part of this network and so you don’t even need a bank account to get a Bitcoin wallet.
Safety and control – You are in control when you are using Bitcoin because no one else is able to gain access to your accounts. All of your information is encrypted and so it can’t be stolen from merchants either. There is no need to disclose any of your personal information at all when you are using Bitcoin.
Transparent and neutral – Everyone in the block chain is able to check transactions at any time. This means that any errors can be picked up on almost immediately. The network will never be under the control of one single person and so it will always remain neutral.
It cannot be counterfeited – Double spending is the most popular way to counterfeit digital money and this is where the same money is spent twice, meaning that both transactions will turn out to be fraudulent. This is not possible when you use Bitcoin and so there is less risk of you being scammed.
Are There Any Disadvantages?
Legal questions – The legal status of Bitcoin is not the same in every country, and in fact it can vary greatly between countries. There are some countries that do not restrict use of Bitcoin, whereas others do not allow it to be used at all.
Level of recognition – There are still some people in business that have never heard of Bitcoin and therefore do not recognize it as an option for payment. The amount of places you can spend them is increasing all the time but you probably will not be able to spend them every where that you want to.
Lost keys – Every Bitcoin wallet will have a unique key that you will need to enter in order to gain access to the wallet. If you lose this key then it is going to be very difficult for you to get into your wallet. There are ways that you can get into your wallet without your key as a fail-safe but these will need to be set up beforehand.
Volatility – Over time the price of Bitcoin has risen, but this has not been a steady rise. There have been steep declines in value that have taken their time to build back up again. This means that there is the potential for your Bitcoin to drop in value almost overnight.
Development in the future – Most people involved in Bitcoin accept that there will be a time in the future when it needs to become regulated. If this regulation comes under the control of an authority such as a bank, then it is likely that Bitcoin will not continue to operate in the same way as it does today.
Can Bitcoin Be Considered A Bubble?
In some ways Bitcoin is a bubble, and there has been a time in its history when this bubble has burst. The price has risen sharply before dropping at an even sharper rate. The price has always recovered but it has taken some time for this recovery to take place. There is also no guarantee that the price would recover again if there was a sharp fall. Bitcoin also shares some of the characteristics that you would associate with a bubble and burst scenario such as a surge in interest due to a big profit being made in the early days of investments.
How Does Bitcoin Differ From Traditional Currencies?
Decentralised – Bitcoin is the only currency in the world that is not controlled by a central bank. It can be used all across the globe and is not controlled by one specific person.
It can’t be counterfeited – Physical currency can be counterfeited easily by criminal gangs and is something which is hard for authorities to completely stamp out. It is very difficult to counterfeit Bitcoin as any unusual activity would be picked up straight away.
It is durable – There is no way for Bitcoin to become damaged in the same way as banknotes can be torn. Once Bitcoin has been created it cannot be destroyed.
It can’t be recalled – When you have received Bitcoin, there is no way for the sender to recall it without your permission. This helps to keep you protected when you have been paid for a service or for goods as the money will remain with you.
It has no geographical restrictions – The currency that you use in the country you live in may not be accepted in any other countries, with the exception of the Euro. However, this is not an issue with Bitcoin as it can be used to buy and sell from countries all over the world without any need to worry about converting currency.
Can Bitcoin Be Taxed?
There is no current way for Bitcoin to be taxed as many countries do not even recognize it as legal currency. However, this is a situation that is likely to change because as more people start to use Bitcoin, governments are likely to want to get involved in this anyway that they can. This may include taxation of Bitcoin so that they are able to make some money out of this growing trend.