If you have been paying attention to the news lately, you would know that Bitcoin is all the rage. If you are a little confused about what bitcoin actually is you need not fear because you are definitely not alone.
A lot of people have trouble understanding Bitcoin, even people that are currently investing in it and turning a profit. Whether you want to get rich quick or if you are just trying to understand the world around you, learning about bitcoin is an essential part of the human experience and so you definitely need to work on it.
In the simplest of terms, Bitcoin is a digital currency. It is the first of a slew of online currencies referred to as Cryptocurrencies.
These currencies are a little different from other currencies that we traditionally have used such as the dollar in the sense that it does not come from a centralized source. There is no bitcoin mint, nor is there a central bitcoin bank.
This is part of the reason why people are so excited to use it, because it provides them with a chance of spending money completely anonymously whilst enjoying the perks of added security.
The Blockchain
If you want to understand bitcoin, you first need to understand the blockchain because this is one of the most important aspects of bitcoin overall. The blockchain is a term used to refer to a ledger of sorts that records pretty much all bitcoin transactions. It is not a physical ledger, but is instead a series of physical servers that exist across a vast network of computers across the world. This is what people mean when they talk about bitcoin being a decentralized currency. There is no central source of the currency, and there are a lot of benefits associated with this.
One major benefit is that your money is a lot safer than it would be otherwise. We often hear about corporations and the like getting hacked, with the hackers plundering vast sums of wealth. This has happened with banks as well, banks as high profile as JP Morgan. Since the blockchain is spread across so many different servers, it is virtually impossible for a hacker to gain access to your money simply because of the fact that they would have to hack into far too many servers if they want a decent sum.
Another advantage is that bitcoin is regulated purely by the free market. There are no unnecessary regulations to make the value of the currency go up or down. Although this has resulted in some confusion when it comes to how this money can be spent, it has also allowed the value of this currency to skyrocket allowing people that made a small initial investment to end up as millionaires!
How People Earn Bitcoins
Another aspect of the blockchain that is important to discuss is the fact that it can allow people to earn bitcoin. This is referred to as bitcoin mining. Essentially, what you have to do is hook up a server to the network that is used to record the blockchain, and for every transaction that you help record you get a small amount of bitcoin. This is easy money because you don’t really have to work for it, all you need to do is focus on recording as many transactions as possible by leaving your server on in a room with uninterrupted power supply.
How People Buy Bitcoins
There are a few different ways that people can buy Bitcoins, but the most common way here in Australia is via an online exchange. CoinSpot is the most poplular Australian exchange - see a CoinSpot review on FindBitcoinATM.
How Does Bitcoin Work?
Essentially, a bitcoin is a little piece of code that you get. This code is ascribed value based on how people are trading the currency in question, and there are two security keys that are produced whenever bitcoin is generated. Using bitcoin is a lot like having access to a private vault. When you make a transaction in bitcoin, you are basically putting a sum of money in the vault and are giving someone the combination to said vault so that they can open it up and take whatever you are paying them. This is a highly secure system because only someone that you have given the code to can access your money, and that too only the money that you are allowing them to withdraw.
If there is ever an issue with delivery of goods or payment, the blockchain can be referred to in order to set things straight. Each bitcoin transaction has a unique key that can be used to trace it down in the immense blockchain that now exists due to the high volume of transactions being conducted. As a result of this fact, it is a lot easier to find errant bitcoin transactions than it would be to look through receipts of things that you have bought with mainstream currency.
Struggle for Legitimacy
One of the biggest reasons why bitcoin has struggled to achieve legitimacy is because it is so new. People are usually not willing to buy into new ideas until they are well established. When you couple this with the fact that a lot of people that were initially using bitcoin were using it for criminal activities, you can understand why a lot of people might have been unwilling to invest in this cryptocurrency.
However, last year the value of bitcoin soared by an incredible 2000% before dropping halfway once again. This has shown people that there is an immense amount of value in this currency, which is why people are starting to invest in it more and more as time passes by.
Bitcoin software is open source so there are a lot of other currencies out there as well that are making their mark.
Only time will tell whether or not bitcoin is actually the currency of the future, but from a purely theoretical perspective this is the ideal global currency because it is controlled by the people who use it rather than some nebulous authority that everyone will have to listen to if they want to keep their transactions going.
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