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What is Bitcoin? Is it actually beneficial


Jun 06, 2018 Posted /  2248 Views


What is Bitcoin? Is it actually beneficial

Just like we have currency in the form of hard cash i.e. paper money, or money in our online bank accounts, created and managed by financial institutions like banks, a new breakthrough in the financial sector in 2009 came in the form of Bitcoin - a type of cryptocurrency and a worldwide payment system. It is basically a digital asset designed to be used as a means of exchange for secure financial purchasing and transactions. Bitcoin is based on the thought of not being operated by a single government authority or a centralised bank. Hence the term “decentralised” form of cryptocurrency is most often used in regard with Bitcoin. It has stirred up revolutionary debates all over the World Wide Web and on one hand where Japan has announced Bitcoin to be a legal form of payment in their country, there are still several countries and organisations refusing to accept it, pegging it to be just a scam or fraud.

 

The domain “bitcoin.org” was registered on 18th August 2008. A link to a paper authored by Satoshi Nakamoto, dubbed as the founder of Bitcoin, titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ was posted to a cryptography mailing list later that same year in November. The identity of Satoshi Nakamoto remains a mystery till date. No one is even sure of whether it’s a single entity or a group of people.

 

Bitcoins, unlike the usual hard cash, aren’t printed on paper and nor do they conjure out of thin air. A heavy hardware requiring the process called mining is used to generate Bitcoins. This requires investment into a lot of heavy mining equipments and access to a lot of electricity and bandwidth since the Bitcoin network is notorious for consuming truckloads of energy. Built upon a technology called Blockchain, a network of nodes work together to ensure the integrity of transactions achieved by acquiring consensus. These nodes race to solve a heavy mathematical puzzle using the trial and error method. The first computer to successfully solve the puzzle is known to “mine” the Bitcoins. Once you have mined your coins, or brought your Bitcoins over the network, digital wallets resembling online bank accounts are used to hold your Bitcoins. Your credentials are required to access your digital wallet and no one can take money out of your wallet unless and until you authorize such a transaction or make the payment yourself.

Bitcoin is programmable money. Traditional money is basically determined by a shared set of rules for exchanging values. In the context of Bitcoin, this value is not determined by any intermediate authority but by the payer and the payee. The terms and conditions once finalised are then codified. Bitcoins do not have any set of inherent values. Unlike hard cash, where a 100 pound note will always bare the value of a 100 pounds, the value of Bitcoin increases with increase in its popularity and vice versa.

 

Bitcoins are not infinite in number. There are exactly 21 million Bitcoins available aimed to make each coin more valuable. Till date 12 million Bitcoins have already been mined at a rate of 3600 new Bitcoins/day. If this rate is kept constant, and with an upper limit of 21 million Bitcoins available, the last of the Bitcoins would have been mined by the year 2140.

 

Since the Blockchain technology provides for an open ledger accessible to every member of the Bitcoin community, all details of every transaction ever done over the Bitcoin network can be seen by everyone. This ensures openness, trust, security and clarity. This however does not mean that your personal information is accessible to anyone. Another characteristic feature of Bitcoin transactions are that they cannot be revoked or reversed. This means that once initiated, you cannot request for a transaction to be canceled or reversed. Hence, it is very important to make wise decisions when making Bitcoin transactions. This makes sure that no one can force you to pay for your bills more than once.

 

What makes this a more loved form of currency by its existing users is that transactions done over the network do not incur for any additional transaction fees, processing fees or other charges usually imposed by banks and other financial services.

 

The only proof of ownership of a Bitcoin that the network recognizes is the private key. Loss of the private key renders the coin unusable. An intelligent way to avoid this loss is by keeping a backup of the private key in a safe and secure location. That being said, it is very important to wisely secure all your coins in your digital wallet since there have been several reports of people being careless with them and eventually losing them and incurring heavy losses.

 

In the crypto world, we eliminate all expensive constraints usually faced in the physical or digital world namely limitations put by goods, paper currency, human/bank speed, distance etc. Also, no third party is required to settle transactions. In contrast to credit settlements, which require actions by the bank and take almost weeks, and in some cases months, for the settlement transactions to pull through, Bitcoin transactions are settled within 10 minutes.

 

Although Bitcoin has still not been identified as a legal form of money all across the globe, you can still use your Bitcoin to purchase commodities at several stores both online and offline. Several restaurants, cafes, pizzerias, hotels, jewellery stores, supermarkets have identified Bitcoins as a form of payment for their product. Even big companies like Microsoft and Dell accept payment made via Bitcoins. Not only this, you can also make donations at several places using your Bitcoins.

 

And although investors are constantly worried about the extremely volatile nature of these Bitcoins, over the last half an year, the value of Bitcoins has relatively stabilised and have since then been appreciating steadily with no extreme fluctuations making it a very sound investment.


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Tags: bitcoin blockchain Satoshi Nakamoto Peer-to-Peer Electronic Cash System’

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