Bitcoin has enjoyed a lot of publicity in the last couple of years. The online currency came with a promise of revolutionizing the way we do business, and many others have followed in its wake. However, many people are still confused about the term Bitcoin. In this article, we will attempt to introduce you to this popular digital currency.
What is Bitcoin?
Bitcoin is a form of digital currency or cryptocurrency that came online in 2009. Bitcoin is a currency on its own and is different from the conventional banking and payment system. Bitcoin is based on a network of computer systems that solve complex mathematical problems, which it uses to authenticate and verify every transaction made on the platform. As a digital currency, Bitcoin is not subject to the control of any Central Bank or financial regulatory body in the world. Its value fluctuates with the level of confidence people have in it. If more companies and individuals adopt Bitcoin as a medium of payment, its value increases, and vice versa.
Bitcoin is based on a Blockchain technology. The Blockchain requires new blocks to be added to the network by miners who solve complex mathematical problems. As new blocks are mined, they are added to the chain until the last block is mined. For every block mined, the miner gets a reward in Bitcoins.
How to make money on Bitcoin
There are three methods of making money on Bitcoin. You can make money by mining Bitcoins, trading, and saving the coins. The most difficult method of making money with Bitcoins is by mining the blocks because it requires heavy computational power and time. You can also make money by trading the digital currency on binary options trading platforms where you buy at a low price and sell when the prices go up. Additionally, you can save Bitcoins and allow the value to appreciate.
Advantages of Bitcoin
- Because Bitcoin is a digital currency, it is almost immune to the effects of inflation. Our regular currencies lose their purchasing value due to inflation caused by government policies.
- Any government does not control the exchange rate of Bitcoin, and everybody can use it from anywhere in the world.
- Bitcoin is secure and has a low risk of collapse. On the other hand, traditional currencies can collapse if the economy of the country using it is distressed, resulting in loss of savings.
- Unlike paper money, Bitcoins is an electronic currency, which makes it easy to move about. You can carry a billion dollars’ worth of Bitcoins in your pocket, and no other person will know about it.
Disadvantages of Bitcoins
- Bitcoin is highly volatile, and the electronic currency can witness sharp drops in value within seconds.
- It is not yet widely accepted as a method of payment. Despite many companies adopting virtual currencies as a medium of transaction, the acceptance has not reached the level of traditional currencies, which limits its use as a medium of buying and selling.
- Another disadvantage of Bitcoins is that it is untraceable, which makes it a haven for money launderers and fraudsters who don’t want security agencies to know where their illegal funds are stashed.
- Bitcoin is susceptible to hacking, and many investors have lost millions of dollars’ worth of Bitcoins to hackers.
Bitcoin is extremely volatile, and any shocks in the Bitcoin markets will see prices crashing down instantly. In recent times, many Bitcoin enthusiasts have lost a great deal of money due to crashing prices. However, the electronic currency continues to grow despite the emergence of new virtual currencies in the cryptocurrency world. Notable among the new digital currencies are Ethereum, which has taken the world by storm and ANT currency that is making waves in China.
Use of Bitcoin
Bitcoin now has ATMs where people can withdraw cash from their wallet, and you can pay for services online through your Bitcoin Wallet, and a host of other fantastic solutions. Also, many companies now accept Bitcoins as a medium of payment, and cryptocurrency enthusiasts believe more businesses will accept the virtual currency in the future.
The future and Digital Currency
Bitcoin was a trailblazer in the cryptocurrency world, but it’s not the only digital currency in use nowadays. While Bitcoins and others like it hold a lot of promise including ease of use, and freedom from government regulations, many critics believe the system is too opaque and risky. Nevertheless, the world continues to witness the release of new digital currencies, and it is only a matter of time before all our everyday transactions become electronic.