Bitcoin
is all the craze in the world right now. What is it, why has it gone on
to become so popular in the last month alone and why should you pay
attention? This is all what this post is about. Keep reading!
The start of the currency
Bitcoin, as you might’ve known, is the digital currency (or
cryptocurrency) for the 21st century. It’s nothing physical, you can’t
see it, you can’t touch it but it’s there.
But before you
start, keep in mind that Bitcoin is a complex product. The concepts of
cryptocurrencies in general are deep and abstract, and understanding how
and why Bitcoin works requires a fair degree of technological
knowledge. If I may speak frankly, Bitcoin is not everyone’s subject.
To put the idea in simpler words, Bitcoin is an alternative (digital)
currency that can be paid for goods and services much like conventional
currencies. You can transfer Bitcoins to other users and vice versa to
maintain your financial account.
It was started in early 2009
by an unknown person under the name of Satoshi Nakamoto. No one knows
for sure who this person might be or whether there is a whole group of
people operating under this name.
In around-2010, he
transferred all the Bitcoin-related property to Princeton University
graduate, Gavin Andresen. Interestingly, Andresen has himself
communicated with Nakamoto only via emails or web forums. Still, the
amount of Bitcoins owned by Nakamoto are estimated to be around a
million so he’s a billionaire in dollars regardless of his identity.
The currency isn’t dependent on a bank or any other source. Its value
depends on the amount of interest and support it garners, as simple as
that.
Some Facts
Bitcoin is divided into units, just like any other currency in the world. The smallest unit is just 0.00000001th of a Bitcoin.
Only 21 million Bitcoins will ever be created to avoid inflation.
Around 12 million Bitcoins are already in existence today, with their
publishing rate of 25 Bitcoins per 10 minutes slowing down until that
golden 21 million figure is reached, which will happen around 2140.
Around $30,000 value worth Bitcoins are spent everyday worldwide. The
currency has a total market capitalization of more than $8 billion.
Its value has jumped by 300,000 times since they came into existence,
making the people who brought them in their infancy very rich. In fact,
some guy from Florida brought 2 pizzas for 10,000 Bitcoins back in 2010.
How to Get Started with Bitcoin?
To start buying or selling bitcoins, the first thing you need to do as a
new user is install a digital wallet on your computer or mobile device.
The wallet is a free software and is quite similar to a personal
finance software.
The wallet maintains your balance on your
device and encrypts that info. There are two keys given with any wallet:
A private key and a public one. The private key is to be kept secret at
all costs whereas a public key is like an address through which you
carry out your transactions.
This software is available on
mobile, on a PC and as a web interface. Protecting it is necessary as
once you lose it, your fortune is gone and will never come back which is
why getting it installed on PC is the safest bet.
Buying a Bitcoin
The value of each Bitcoin is worth around $650 and while that figure is
on the rise, it is extremely volatile. “But how can I earn?”, you are
asking by now. Here are a few ways.
For one, there
is the simple exchange from real-life money to Bitcoin. The rate
fluctuates a lot but since Bitcoin’s value is mostly going up right now,
this isn’t a very bad bet at all at virtually any cost. However, not
all currencies are exchangeable to Bitcoin.
If you can find a person who is willing, then you can also trade real-life money to Bitcoins. Websites such as www.bitcoinlocator.com are especially helpful.
Bitcoins can also be brought as a physical currency which comes in the
shape of coins. These coins contain a piece of paper inside them
containing a private key. This is a rather expensive way of getting
Bitcoins so it certainly isn’t recommendable unless you want to “touch”
the currency.
Finally, there is mining, which is easily the
hardest way to getting a Bitcoin. This is also the only way through
which a Bitcoin comes into existence (at a rate of 25 bitcoins every 10
minutes as I’ve said before, this rate halves every four years).
Miners use dedicated rigs with ASIC’s in “pools” along with other
miners to solve complicated encryption functions. These are machines
which are build just for the purpose and if you try to do that from a
normal PC, you’re mad.
This encrypted function gets more and
more difficult to solve as time goes on, making the entire process
slower and hence the amount of Bitcoins minted.
Note: If you didn’t understand above 3 lines then trust me its not your fault. Its because mining Bitcoins is not for you.
Transactions and Usage
Bitcoin transactions generally take around 10 minutes to happen, after
first confirmed in the block chain of the network. This makes sure that
Bitcoins aren’t spent more than once but also means the usage is slow,
an area through which its competitors are capitalizing. (In a few cases,
this can also take up to an hour.)
Transaction fees usually
depend on the amount of data which is sent out during transactions.
They’re usually as low as to be negligible but if you’re sending a large
number of tiny amounts worth Bitcoins, they’ll be more.
Bitcoin’s usage is increasing rapidly. In countries like Canada, you
might even spot a Bitcoin ATM. Virgin Galactic now accepts Bitcoins for
an outing to space while in the US, a guy recently spent a measly 91.4
Bitcoins to buy a $100,000 Tesla Model S electric car. Now that’s a
high-tech way to buy a high-tech ride.
In our country, they’re
virtually useless right now but investing in them doesn’t seem too bad
an idea. They are on the way up, that’s for sure but still, investing
your entire fortune into it isn’t something we would recommend right
now.
Advantages
Payments made easy: Bitcoin allows you
to pay with a simple two step scan-and-pay. No need to sign up, swipe
your card, type a PIN, or sign anything. All you need to receive Bitcoin
payments is to display the QR code in your Bitcoin wallet app and let
your friend scan your mobile, or touch the two phones together (using
NFC radio technology).
Security and control over your money: Bitcoin
transactions are secured by military grade cryptography. Nobody can
charge you money or make a payment on your behalf.
Zero or low fees:
Bitcoin allows you to send and receive payments at very low cost.
Except for special cases like very small payments, there is no enforced
fee.
Protect your identity: With Bitcoin, there is no credit card
number that some malicious actor can collect in order to impersonate
you. In fact, it is even possible to send a payment without revealing
your identity, almost just like with physical money.
Disadvantages:
The price of a Bitcoin is volatile, making it difficult to assess its
real value and increasing the risk of losses for investors.
The
relative anonymity of Bitcoin may encourage its use for illegal and
illicit activities such as tax evasion, weapons procurement, gambling
and circumvention of currency controls.
The fact that bitcoins exist primarily in digital form renders them vulnerable to loss.
Other Cryptocurrencies
In case you think that you missed the oppurtunity to invest in Bitcoins
when they were cheap, then things haven’t quite winded up just yet.
There are a number of such currencies including Litecoin (market
capitalization of $421 million, value $17), Ripple, Peercoin, Dogecoin
and Nextcoin. They’re all cheap and virtually useless right now so
investing in them might seem stupid but then again, Bitcoin was once in
the same phase.
The Future
Given its volatile nature,
no one can say for sure whether this recent trend of (mostly) rocketing
value will continue in the future but people should certainly take
notice.
Whether you want to be a part of the boom is up to you
but we really hope it will not prove a bubble in the end. Placing your
bet on something which loses half of its value overnight is a risky
affair.
