What is Bitcoin?
Bitcoin is a digital currency that came into existence on January 2009, which is speculated to be created by Satoshi Nakamato whose true identity is yet to be authenticated. It provides transaction fees which is lower than the traditional online payment systems and is controlled by the decentralized authority and is not like the government-issued currencies.
In the year 2008, the world had been going through a great financial crash. Banks and Government systems of money weren’t working and people were asking various questions about the system.
Amid such a tumultuous atmosphere, on 18th August 2008, a domain name, ‘www.bitcoin.org’ was registered. Till now no-one could find out who registered the domain name. After two weeks, an individual (or a group of people) named Satoshi Nakamoto published a 9-page document. In that document, Nakamoto introduced ‘bitcoin’, a peer-to-peer electronic cash system.
No-one paid heed to Nakamoto since people were dealing with the unprecedented crash in the stock market. Moreover, people didn’t think that kind of system would scale.
A few months later, on 3rd January 2009, the first-ever 50 bitcoins were released. And that was the beginning of a new form of money, the money that could change the way we look at the economy of the world.
How do Bitcoins work?
The best part is there’s no third party in this system. Every transaction happens only between users, without an intermediary.
The reward that is given for using bitcoins is called mining. In February 2015, it was found that around 100,000 businesses approved and accepted these as the mode of payment.
Other than using bitcoin in lieu of services, products, and currencies, you can use it as investments as well.
As per the research of Cambridge University in 2017, around 2.9 to 5.8 million users of bitcoins were reported.
How do you buy a bitcoin?
- First step: To be able to purchase these, first you need to install a “virtual wallet” onto your smart device – your mobile phone or your laptop. This wallet is the software that helps you track all of your transactions and balance.
- Second step: To buy it, you should be ready to spend real money. You can deposit the money through an online payment gateway. Or you can transfer it directly from the bank to the account of a third party website that connects bitcoin buyers and sellers.
- Third step: Once the payment is done, you would be able to order from the website. Treat it just like buying stocks. The way you would buy stocks by transferring the required amount, you would need to buy bitcoins in a similar fashion. You would use an exchange like “bitstamp” for placing your order.
- Fourth step: This is not the next step, but is an alternative way. If you feel that the above steps are cumbersome, you may choose to use a third-party host like “bitinstant” which cuts the effort into half and sends bitcoins directly into your “virtual wallet”.
From the above, bitcoins may seem an alien concept. But it is not. It has many practical uses and applications and it can be used beyond just monetary transactions. This will help the individual as well as society –
- By using this technology, a permanent and unchangeable public record can be created. This will help reduce forgery and fraud.
- By applying this technology, you would be able to create business contracts. These business contracts can be used as evidence that the agreements were made prior.
- By using this technology, one can create their will. If that is being done, there would be no dispute regarding a will of a deceased person. As a result, after the death of the individual, the right people will get the inheritance.
- By using the same technology, national voting records can be built and maintained. As a result, nobody would be able to tamper with it. If any tampering is done by anyone, it would be immediately caught.
These practical uses can be implemented if the majority of the population realizes the value of bitcoin technology and starts to embrace its magnificence.
- Hidden identity: Bitcoin technology is securities against cyber-theft is the ability to keep oneself under camouflage. With this technology, you would be able to keep your identity hidden. Since transactions or accounts have nothing to do with real-world identities, one can only analyze the flow of the transaction. It wouldn’t be possible to find the real-world identities of anybody. You would receive or send bitcoins to addresses that are just the chains of 30 characters.
- No gatekeepers: To use the banking system, you have many gatekeepers who would prevent you from making the transaction. Under this technology, you would have to take responsibility on your own. There would be no gatekeepers and anybody with the open software can receive or send bitcoins.
- More secured: Its almost impossible to hack your account under bitcoin. Its funds are securely locked under a cryptography system. If you’re the owner of a private key, only you can send crypto-currency i.e. bitcoins. Since it is made by using solid cryptography and huge numbers, it’s impossible to hack the address.
- Swift and global: It is super fast. Once the transaction is initiated, it is propagated instantly to the global network; and the transaction would be confirmed within a couple of minutes. And since it is done with a wide global network, the physical location of the owner doesn’t count. You can send bitcoins to your relatives nearby or to a friend abroad using this technology.
- The only possible disadvantage is that every transaction is irreversible. Once the transaction is initiated, it’s done. No-one can reverse this transaction.
- In the usual banking system, a safety net is there in case of critical transactions. Under bitcoin technology, there’s no safety net. If you send your funds to a scammer, your scammer will have the money.
- That’s why it’s important to first confirm whom you’re sending your funds to. You need to be more responsible in sending funds under bitcoin.
This has been a guide to Bitcoin. Here we discuss how it works, practical uses, and also the advantages and disadvantages of Bitcoin Technology. To learn more about Investments, you may refer to the following articles –