So you want to learn about bitcoin? Well, I hope that by the end of this article you will have a pretty good understanding of what bitcoin is and how it works.
What is Bitcoin?
We all know that money is used to exchange goods and services. But when we look at our country’s money, we see lots of red tape beside the physical paper we use to buy things. Paper money can get ripped, torn, dirty, burnt, etc. Also, if you look at paper money closely, you will find that it has no real value other than what the government says it does.
Bitcoin was created to fix these problems. The currency is completely digital and you can’t physically hold it in your hands.
How does Bitcoin work?
Bitcoin has no central headquarters, so there are no specific rules for buying or selling things with bitcoin, unlike the United States dollar, which has certain federal laws about currency transactions. You should base how you buy, sell, or trade bitcoins on the laws in your country.
Bitcoin can be mined on almost any computer or electronic device with enough processing power to support it, but smartphones are not ideal for mining, as they often lack the processing power required to do so.
Why do people use Bitcoins?
There are many reasons for this.
Bitcoins are easy to trade online without needing to use real money through bank accounts or credit cards. You can send bitcoins through the internet directly to someone else’s cell phone in another country instantly, so it is very useful for trading internationally.
The value of Bitcoin has been increasing rapidly since it was created in 2009. The price of Bitcoins is constantly changing and the value of a Bitcoin could go up or down quickly over just a few hours.
Pros and cons of using Bitcoins
Bitcoins are extremely volatile and can lose value quickly. You should take great care to pay attention to how much your bitcoins are worth and also ensure that you’re constantly selling them to ensure that the value doesn’t drop below what you bought them for.
This works the other way, however! You might buy in a dip and make more money as the prices rise.
Bitcoin transactions are irreversible, meaning that retailers cannot provide a refund if you have sent the Bitcoin and then change your mind about the purchase. The only way to get a refund would be to ask the retailer for one themselves or find someone else who is willing to buy the product or service from you.
Bitcoin does not have an “owner,” even if someone has hundreds of thousands of Bitcoins stored in their wallet; all transactions are public and hackers may use your address to determine how many Bitcoins you own by searching for your wallet ID (a random string of numbers that acts like your debit card number). With no central authority, there is no way to run the network or reverse the transactions.
Bitcoin can be easily exchanged for real money and vice versa. The value of a Bitcoin changes every day based on how many people will pay for it and what they’re using it for. It isn’t regulated by anyone and can easily be used to buy illegal drugs and other black market items.
Who created Bitcoin?
Last, we have a brief history of bitcoin.
In 2008, Satoshi Nakamoto detailed the workings of his electronic money system in a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System.” The idea was to create something like cash for the internet that would allow online payments to be sent directly from one party to another without going through a financial institution.
The very next year, Nakamoto changed the world with this invention when he released bitcoin’s software into the wild. The open-source code meant people could tweak it to their own purposes, which is exactly what happened in the years since then. As people have done with the internet, they have built applications on top of this world-changing protocol that Nakamoto unleashed.
Most people initially viewed Bitcoin as an experiment that may or may not succeed. Perhaps it would help usher in a new era of financial freedom, but then again, maybe everyone would realize it’s just too confusing and nothing more than a fad.
But as time went on and people began to understand how powerful it was, they realized something else: its massive potential for disruption.
The first way Bitcoin disrupted the financial space is with the peer-to-peer payment system. It removed middlemen that typically slowed down transactions (like banks or credit card companies) and allowed anyone to send money with minimal fees.
A second disruption was the fact that Bitcoin is decentralized, with no central authority involved in its transactions or creation. Instead of having to trust a corporation or government to control your currency, you can simply trust the system itself with no need for an overseeing party.
Then came something even more powerful: smart contracts. A smart contract is a digital protocol that facilitates, verifies, and executes an agreement between two parties. Instead of spending money to hire a lawyer, all you have to do is include the common terms and conditions in the blockchain—kind of like having your own private attorney on call 24/7.
Smart contracts may be one of the most important technologies for the future progress of humanity.
The underlying technology of bitcoin is a secure, decentralized ledger that will have a major impact on the way we do business in the future.
It’s fairly obvious at this point that bitcoin is here to stay. The best thing you can do is educate yourself and prepare for what’s coming next.
Thanks for reading!