What is Bitcoin?
Bitcoin came into existence as a cryptocurrency or digital currency by a man named Satoshi Nakamoto. Fiat-based currencies are used for the exchange of goods and services, and its usage or application is restricted to a particular country or region. Bitcoin being a cryptocurrency is different from fiat-based currencies in the sense that it is not restricted to a particular location but is used globally and can equally be converted from one currency to another. BTC being the symbol of Bitcoin is not centralized and can be mined or created from any location.
Here’s a great 3 minute video by the Guardian explaining it in simple terms:
What is Cryptocurrency?
Many people might begin to ask for the meaning of cryptocurrency or digital currency. The answer is simple. Cryptocurrency or Digital currencies are alternatives to conventional currencies we usually employ for transactions. It is virtual money that can be used to make purchases, settle services and converted to other currencies; just like every other currency but will only exist in digital form. BTC is the nascent and most acceptable Cryptocurrency.
What is Blockchain?
A more interesting subject when discussing cryptocurrency is the blockchain. The blockchain can be described as a public ledger that monitors all the transactions that are made irrespective of the amount involved. It is available for members of the public to access and view.
A lot of things can be created onto the bitcoin blockchain, one of which is the coloured coins. No doubt, the coloured coins still possess the features and security inherent in bitcoin, however, if not properly considered, it can represent something different. Blockchain technology as of now is being considered by entrepreneurs as well as software developers with a view to developing new products and services. The blockchain technology has the potentials to transform the financial sector and create new businesses with innovation.
The maintenance of the bitcoin network is decentralized, making it difficult for an individual to assume total control of the network. One needs a mining power of over 51% to assume control of the Bitcoin network. Attempting to control the network is highly expensive, and there would not benefit for somebody trying to control the network.
Most bitcoin exchanges leverage on the blockchain to carry out business. Some exchanges created their own blockchain, while others depend on the general purpose blockchain known as Ethereum.
How legal is Bitcoin?
Bitcoin is a cryptocurrency that has gained acceptance and popularity globally. The use of Bitcoin and its legality depends on the country. While some countries decide to regulate its use, others outrightly leave it to thrive unregulated. Countries like Bangladesh, Russia and Ecuador have banned BTC usage completely; China accepts its use for individual purposes but not for corporate use.
In EU countries as well as Britain, BTC use is legal and is unregulated. The use of Bitcoin is legal in the United States; however, it is classified as an asset for taxation purposes.
Why Use Bitcoin
The use of Bitcoin is more profitable than ordinary virtual currencies. It is almost free of charges when receiving or sending Bitcoins. A minimal charge is placed on every transaction made without reference to the amount of the money involved. With the introduction of Blockchain Wallet, transactions can be made anywhere as long as you have access to the internet. Transactions made with Bitcoin are recorded and secure in the Blockchain and reference can be made to this transaction anytime. Owning and operating a Bitcoin wallet is much easier than a bank account.
What is a Blockchain wallet?
This is a personal Bitcoin account where you can store, transfer and also receive your bitcoins.
It is very easy to open a Blockchain wallet, all that one needs is a functioning email account.
Login to www.blockchain.info and create an account is a good way to go. Also, Blockchain app is available on Google’s play store and other stores. With a good internet connection, transfer and receiving of funds are usually fast. The unique way each transaction is handled in the Blockchain allows for absolute control of the parties involved. The most important part of any wallet is for one to keep the string of keys safe; failure to do so will not only make one lose the Bitcoins, but access to it cannot be allowed.
How do I Store Bitcoin?
Storage of Bitcoins does not actually refer to the storage of the currency, but it is the storage of the string that bears the address of the value of the bitcoins.
This involves the hosting of the information of the owner of the account and the probable transactions made. There are many hosts of this string, but the recommended host is Blockchain.info. This allows for website use as well as app usage. They are usually easy to use and are usually advisable for beginners to hook up with this platform. Like every other currency-related transactions, it has security challenges which can be minimized by enabling 2FA (Two Factor Authentication). This is where a message is sent to your phone to authenticate before processing the transaction.
Some of the major advantages of this platform are mobility and the ease of accessibility. Also, it has strong security against malware and other forms of theft if the 2FA security is enabled by the user. However, there are some disadvantages to this which include the risk of coin theft and inadequate control with some providers.
There is also the Multi-Signature Coinbase Wallet. This involves three or more pass keys that are used before any access is gained to the wallet. One key is held by coinbase while the other two is held by the device and the user respectively. This system is more secure since it involves more than one access keys, provided the account is setup using an uncompromised device. It is the most reliable and secure wallet for online use.
How is the Price of Bitcoin Defined?
As the Mining of Bitcoin continues, it gains value significantly around the globe. The price of Bitcoin is defined and determined by many factors, and these factors have allowed it to gain value in pricing over the years. They are; definite or limited supply, energy in the form of electricity to sustain and secure the Blockchain, the application of the currency and its ease of storage. Other outstanding factors include Innovation, Government policy and the public view of the currency.
Just like precious metals on earth gain price due to its paucity, so does the limited availability of Bitcoin is. Bitcoin has just 21 million units that can be mined, and any of it lost cannot be gained, thus considering the spread of this number over the world’s total population, Bitcoin will always gain price tag following the simple economic law of demand and supply.
It takes a sizable amount of electricity to mined and as well secures Bitcoins. With this energy in continuous usage, the price of Bitcoins will keep going on the high side.
As other factors, the ability to use Bitcoins actually overwhelms other competing cryptocurrencies, this also allows its demand to increase the likelihood of making transactions with it is high.
Bitcoin is not usually affected by forces of the market like the conventional currencies although an attack on it by the media can cause its price to fall; this is due to the fact that the negative influence from the media will interfere with the public’s view of the currency.
However, recent government’s policy can affect its price for example; a ban or heavy tax placed on it will reduce its usage and consequently lead to price fall.
Bitcoin is the mainstream currency, being the first cryptocurrency, it acts as the reserve currency for its users. When you decide to keep tabs on Bitcoin prices, over the years, you will marvel at how well it has performed in the market.
How is Bitcoin different from the Traditional Banking System?
Bitcoin is very different from the traditional banking system which operates by the orders of its regulators. For example, the apex bank of every country regulates the pricing and quantity of its money in circulation which is the exact opposite of the operation of Bitcoin. In order to increase the amount of money in circulation, it just need be printed or minted and then injected into the economy.
The banking system is open to fraud, figure and exchange rate manipulation by bank officials and top government officials. Banking operation is usually limited to the amount of cash available to be dispensed to the customers; thus if the customers decide to withdraw all their money at once, there is every tendency for the bank to fall.
The operation of Bitcoin is quite dissimilar to that of the traditional banking; it has “stops” all over the world where it is mined and manned by bitcoin investors. These stops engage in solving dicey mathematical calculations while at a time retaining the memory of the fast-tracking transactions taking place. Unlike banks, the Bitcoin ledger is the Blockchain which is maintained and run by individuals and private corporations.
The traditional banking is not without benefits which include the use of cash which is independent of electricity, credit and debit cards accepted almost everywhere and ability to recover your loss in the event of fraud.
However, the disadvantages of the traditional banking system must be made known so as the comparative advantage of Bitcoin can be conspicuous. These disadvantages are Lack of transparency in the system, systems’ susceptibility to fraud and manipulations and its tendency to yield to market forces. Another striking disadvantage of using the traditional system is that transaction fees can be very high especially if it is for business.
On the other hand, Bitcoin has the ability to be split into several units which are still acceptable for transactions. The fees charged for Bitcoin transaction is negligible compared to the charges accruing in business transactions involving the traditional banks.
It is equally wise to bring to knowledge some drawbacks of Bitcoin as compared to the Traditional banks. These include not being accepted by world’s major merchants, legal issues in most countries and the inability to reverse transactions in the occurrence of fraud.
How can I buy Bitcoins?
By now you must have had the basic information needed about Bitcoins, so it’s time to know how to purchase it. It is common knowledge that Bitcoin can be created through mining, to buy Bitcoin is easier than exchanging a conventional currency. After the blockchain account has been created, the next thing to do is to choose a buying method. There are Bitcoin exchanges such as Coinbase, BitX, Bitfinex, among others. These exchangers accept payment systems using bank cards in exchange for Bitcoins.
Another outstanding method of payment is the use of Bitcoin ATM, although recently the American government has come up with some regulations limiting the use of ATMs in the purchase of Bitcoins.
A Bitcoin ATM works almost like the bank ATM, in this case, all one does is to make the payment and then hold the corresponding wallet’s QR to the screen which too is scanned. The corresponding value of Bitcoin paid for will be credited to the wallet.
This Bitcoin ATM is not available in many countries even though Bitcoin is legal in these countries. The most widely used means of purchasing Bitcoin is to patronize the exchangers.
What are the benefits of using Bitcoin as a payment system?
There are many benefits of using Bitcoin as a payment system which we will go through. As a merchant, Bitcoin allows you to trade worldwide without any currency limitation. It allows large payment to be made without placing exorbitant fees on it or a cap.
Also, Bitcoin allows fast confirmation time between a buyer and a seller once the deal is struck. It takes about 10 minutes for each transaction to be confirmed.
Bitcoin has the ability to change the face of commerce in the world. With the ease involved in making payments and also ferrying cash from one place to another, its benefits to the world at large can never be overemphasized.