Bitcoin is a digital virtual currency that is designed to give online users the capacity to process transactions without restrictions from outside third parties like governments and banks. It is also referred to as a type of electronic currency or crypto-currency that is autonomous from conventional banking. The technology was designed in 2009 by an undisclosed individual hiding under an identity named Satoshi Nakamoto. To this day, the programmer of Bitcoin has never been known. However, since 2009, Bitcoin has garnered enormous attention and also controversy as a substitute to Euros, US dollar and other commodity currencies such as gold and silver. A network of computers connected to a private program is used to carryout transactions and also process the payments in term of Bitcoin. The introduction of this currency was to help solve complex mathematical algorithms, so that the details of each transaction can be verified and recorded.
How Does Bitcoin Work?
As a user, you need to create a Bitcoin wallet in order to access your Bitcoins and be able to send them to other people. Unlike traditional currency, Bitcoin is not under central control. It works in such a way that each and every transaction has to get collective approval from a users’ network. The price depends on the users’ confidence level and the more companies accept it as a payment method, the more successful Bitcoin will be.
Bitcoin is not found in coins or notes and is not held in vault. Please note that, its supply is capped at 21 million. With every 10 minutes, about 25 Bitcoins are mined and so after a period of 4 years the amount released will continue increasing.
How to Setup a Bitcoin account
As a user you get a Bitcoin wallet from a Bitcoin broker. You are then supplied with a Bitcoin address composed of letters and numbers. You also acquire a private key which serves as a password.
Characteristics of Bitcoin
Bitcoin has purchasing power and uses online trading instruments to carry out investment applications. These characteristics are similar to the ones of traditional currencies but the difference is in the fact that Bitcoin can only work online or in the digital world.
One of its unique characteristics is that it is decentralized. This means that users can take total ownership of their digital currencies since they are not run under any financial institution or governing body so it is not under any control.
Any transaction made using Bitcoin feature Bitcoin addresses which are not linked to any personal information such as names. With conventional payment systems, personal information is asked for. This may put conventional payment users in jeopardy because of schemes and frauds surrounding these systems.
Transactions are kept in a publicly accessible ledger referred to as blockchain. Other users can see the address but not any personal information.
Bitcoin accounts are easy to create since only little information is asked for during the process. Bitcoin transaction fees are lower and the processing speed is higher compared to the one for traditional payment systems.
Uses of Bitcoin
This virtual currency has three popular uses. It can be used to buy goods and services, send money anonymously or it can also be used as an investment. It is used as an application feature for several investment vehicles. These vehicles include binary options platforms, trading Bitcoin and forex among others. Moreover, some brands provide Bitcoin currency revolving services.
Benefits of Using Bitcoin
1. No taxation – When an individual make purchases with any government currency such as US dollars or Euros, he or she has to pay an additional amount of money to the government as tax. Each purchasable product has its own designated tax rate. But when you make purchases through Bitcoin, taxes are not included. This is one legal form of tax evasion and a major benefit of using crypto-currency. With no taxation, Bitcoin is convenient especially when purchasing items that are exclusive to overseas. Such items are heavily taxed by the government.
2. Minimal transaction fees – Exchange rates and transaction fees are part and parcel of international purchases and wire transfers. Since, Bitcoin is not monitored or supervised by any government body, it attracts minimal transaction fees. This means the cost of transacting via crypto-currency is low unlike other international transactions made through conventional currencies. Moreover, transactions in Bitcoin are less time consuming because the process does not involve the obstacles of typical authorization requests and all the waiting periods.
3. Flexible online payments – since Bitcoin is an online payment system just like any other online system; the users have the benefit of paying for their coins from any part of the world that has internet connection. So a person can be lying on his or her bed and purchasing coins instead of going to the bank or to a store to get the job done. Again, when using this means of payment, you are not required to fill your personal details to make a transaction. This means that the transactions are a lot simpler than any transaction carried out through credit cards or bank accounts.
4. No outside interventions – one major benefit of Bitcoin is that it removes third party disruptions. This means that government and financial institutions such as banks have no powers to interfere with any Bitcoin transaction or freeze an account. Hence, as a user, you enjoy the freedom when making purchases with Bitcoin than when making purchases with national currencies.
5. Concealed user identity – All Bitcoin transactions are concealed. This means it gives you the option of user anonymity. The transactions can never be tracked to you and no any purchase is connected with your personal identity.
Clearly, Bitcoin as a form of currency is very flexible and its use offers new and great beneficial opportunities to its users. Additionally, it is easy to use and offers great profit making capabilities. Many merchants are now accepting Bitcoin as a form of payment. By preferring this type of electronic currency over cash, users enjoy the anonymity of their transactions.