What is Bitcoin? (In most simple terms)
Here in this context, the reader will be able to dig up all the need-to-have knowledge about Bitcoin. The term ‘Bitcoin’ is explained in many different but easy ways. Reading this context, you will discover the reason for which you should pay for it. Along with that, the schemes you can use to purchase and utilize it for your benefits, tips to avoid scams and ways to shelter as well as use your first piece of digital currency.
Bitcoin is a sort of electronic cash, a decentralized digital currency. It is a kind of cryptocurrency that requests no bank or even a single superintendent for its continuance as no intermediaries are required to transfer it between users through a peer-to-peer network.
Bitcoin refers to virtual currency. Similar to check, wiring or cash, Bitcoin is a method of transaction but as an orientation to technology. For a deal with BTC or Bitcoin, the purchaser is referred to the sign of the holder. The sign refers to a long line of security code that is encrypted with 16 divergent codes. To get the cryptocurrency, the purchaser decodes the code by means of his smartphone.
In general, Bitcoin, like other cryptocurrencies, is an exchange of digital information using which one can buy or sell goods and services in a safe and sound manner as it is running on a peer-to-peer network. A peer-to-peer network is a trustworthy computer network similar to Skype.
According to the Creator
The creator of Bitcoin designed it as a medium with which two entities can do business or trade directly with one another without hesitation and the need of an intermediary except pure mathematics. The transaction will be as per the expectation until the entities trust in maths.
Need and Evolution
Bitcoin was materialized to create a decentralized system, a system that allows the holder to control and track his funds. Bitcoin was introduced to the crypto-market at the time when Occupy Wall Street was actively influential in accusing big banks of corruption. The banks were accused of mishandling borrowers’ money, tricking clients, incriminating boggling fees and rigging the system. Bitcoin pioneers aimed to eliminate the middleman. They wanted to put the supplier in charge and abandon the interest fee. They thrashed about to get an endorsement to make transparent transactions to hack corruption and cut fee.
The ultimate goal of Bitcoin’s creator is to achieve endorsement, balance confirmation, proscription on double spending, deliverance of assets and documentations inalterability using public key cryptography and an inventive move towards to secretarial.
In cryptography, authorization is ensured with an unhackable private key for transaction; unhackable to such an extent that if the best computer of the world tries to crack it, it will take time longer than the existence of the sun and even the earth!
With the arrival of Bitcoin, problems like thieves hacking accounts, setbacks in the transaction and high volatility have vanished. For developing nations, Bitcoin has become a steadfast means of sending and receiving money.
In a relatively short duration, Bitcoin has traveled quite far. It has developed its application program interface along with the price index and exchange rate. Popular companies, for instance, large jewelry chains including REEDS Jewellers, Dell, Expedia, PayPal, and even Microsoft have accepted Bitcoin. Besides, even hospitals in Warsaw, Poland are using Bitcoin for money transfer. With the support of billion-dollar businesses such as Dell, the business of Bitcoin is touching heights. Websites have begun to sponsor it, magazines circulate its news and the forums themselves trade its coin and discuss them.
Let us understand it’s working without being methodological or multifaceted starting with a brief description of general terms. All the confirmed transactions are called ‘blocks’ and the ledger on which Bitcoin work is called blockchain.
As soon as the blocks enter the system, for checking their validities, they are broadcasted to the peer-to-peer computer network of users. This process helps users stay aware of each transaction. In this way, users can prevent binary spending and stealing. The users will not necessitate spending twice as a currency as should be spent. To sum up, Bitcoin helps users trust the system.
On this subject, the creator says, Bitcoin is not a customary currency. It is not issued by central banks and other central financial power. On the contrary, it is underpinned by a peer-to-peer computer network. The network is formed of machines of the users. In other words, its character is similar to networks that strengthen BitTorrent. A file-sharing system, Skype, audio, video and chat service is the same as the kind.
Due to the execution of tasks with tricky number crunching, Bitcoins are mathematically generated. These crunching tasks are called Bitcoin “mining”. To prevent mining, a system called ‘the mathematics of the Bitcoin System’ is set up. This system can make it more difficult to “mine” Bitcoins. However, only 21 million is the limit of the total number that can ever be mined.
About Bitcoin mining
Mining is itself a process that keeps the process of Bitcoin secure. It does so by unceasingly adding new transactions to the chain and caring them in the queue. Then, it chops off the blocks finalizing each transaction, decodes the codes of Bitcoins passed or exchanged.
With mining, new Bitcoins are also generated using an extraordinary kind of software to solve cryptographic nuisance. This provides people with encouragement to mine. Mining provides a smart way to issue the currency.
Talking about the rewards, it is generally 12.5 Bitcoins along with what was paid to make transactions, though the agreement requires views of everyone in the network for a reward. As already discussed, a total number of 21 million Bitcoins is the maximum limit of Bitcoins in distribution by the year 2040. This will efficient enough to avoid every sort of price increase, to keep the system convenient and to make the puzzle even harder.
Under this topic, we will cover certain benefits as well as unprofitable properties of Bitcoin to help you understand why to use Bitcoin and what are the risks one may face while doing so.
- Transactions are fast and universal.
Within a few minutes, your data can reach its destination. The network is global which indicates that whether the transaction is propagating to your neighbor or the person sitting on the other side of the world, the information will reach instantly without considering the physical locations of the sender and the receiver.
- Funds are secured.
The security of Bitcoin authority is quite impressive. They have created a public key cryptographic system to lock down the funds which can only be unlocked with a private key that the account holder owns. The scheme is unbreakable with brawny cryptography and enchantment of big numbers. Even Fort Knox stays far behind Bitcoin address when it comes to security.
- Anybody can use the software.
For using cryptocurrency, people are not required to ask for permission as there are no restrictions or eligibility criteria. Bitcoin can be used through software which can be downloaded by everybody for free. Just install the software and start sending and receiving Bitcoins.
- Transactions cannot be reversed!
Once the courier left the source that is once the transaction is confirmed, no one, mark the words ‘no one’ in this entire universe can reverse it. Wherever the money has been sent, whether in the account which you registered by mistake or unfortunately to the hacker as a result of stole from the computer, it cannot be regained back.
- No reality!
The transactions, as well as the accounts of the holders, are not associated with an identity of the genuine world. They are erratically apparent chains of around 30 characters where you receive your Bitcoins. These chains refer to the address. One cannot link real identities with these addresses though he can track and analyze the flow of transactions.
Places to buy Bitcoin from
Now that you know what Bitcoin is and how does it work, you are in a state to try it. There are several places where you can buy Bitcoins from, though most of them are covered in four categories. You can buy Bitcoin from these four below-listed methods-
- Cryptocurrency exchange
Exchange your regular coins, satoshis or any sort of cryptocurrency for Bitcoins. Satoshis is like the BTC-type of cents.
- Coinbase and Coinsquare in the US & Canada
- BitBargain UK and Bittylicious in the UK
- Bitcoin ATM
- Change Bitcoins or cash for another cryptocurrency.
- Classified service
- Find a seller who will help you trade bitcon for cash.
- Sell a product or service for Bitcoins
- Sites like purse
But beware! Look for reviews from previous customers of the service you are going to use. Bitcoin is infamous for a scam. You can also post your questions on the forum.
After buying Bitcoins, the next step you are going to take is, storing them at a secure place. When an entity buys Bitcoins, he will have to put them in a wallet known as a cryptocurrency wallet. One can use a cryptocurrency wallet using these three different applications-
- Full client
Here the users get a standalone email server. This server does not hinge on third-party servers but handles all the phases of the process alone. In other words, one can track and control all his transactions from commencement to the conclusion on her own, though it is not for beginners.
- Lightweight client
Again, it is a standing email server. The difference is it connects to a mail server for admission to a mailbox. For sure it will store the Bitcoins of the individual but only with the support of a third-party-owned server. Without the help of a third-party server, it cannot make transactions and can’t access the network.
- Web client
It is opposite to a full client. A third-party server is required at every cost. It is the same as webmail where the individual has no role as the maintenance is in the hands of the third-party.
These were just applications to be used to store Bitcoins. The wallets used for storing are of five main types
Each of the above-mentioned types has its advantages and disadvantages. Search for cryptocurrency wallets on the internet for more details.
Using Bitcoins for purchasing and selling goods and services (Bitcoin transaction)
To make this concept of Bitcoins more clear, we have illustrated an example of two entities making a transaction.
Mary wants to buy cosmetics from James’ store using Bitcoin. For doing so, she sends him her private key. This key is nothing but the sequence of letters and numbers containing the source of the transaction of the coins along with the amount to be transacted. It also carries with itself the digital address of James’ wallet which is, this time, another public sequence of letters and numbers.
Receiving the key, James tries to decode it by scanning the key with his smartphone. Simultaneously, the news of this transaction (Mary’s transaction) gets televised to all the other network contributors on her ledger. These participants are termed as nodes. The transaction gets approval after around ten minutes through a procedure including the use of several technical and business convention called mining about which we have already read. It is this mining store that gives James a score to get informed about making a choice for whether he wants to proceed with Mary’s transaction or not.
In this method of transaction, what one gets as a physical trace is the record of its transaction between different addresses. There is no physical trace of Bitcoin like that of dollars. Only the balances can be traced that are stored on the blockchain, rising and falling in their records.
Protect you Bitcoins with these simple tips
Protecting your Bitcoin is not as easy as it seems. One has to be careful in several aspects to save his money from getting spent unnecessarily.
For everyday use, always store only a small amount of Bitcoins in your computer, mobile or server. The remaining part should be kept in a safer environment until it comes into use. To help you keep your Bitcoin secure and let them go further, here are a few bits of counsel.
- Shield your wallet from thieves by encrypting it or your smartphone with a well-built password. Also, backup the wallet regularly, it may reduce the risk.
- Keep only some amount of Bitcoin in your wallet. Keep the rest in an offline, disconnected environment so that you can think your Bitcoins are safe in a bank. This step will help to add security.
- Update your software and use Bitcoin’s multi-signature feature. Through this feature, one can add extra protection allowing transactions to require multiple autonomous approvals to be spent.
- As in this public form of Bitcoin, your balances and chronicle of transactions can be seen by anyone on the network, it is better to have multiple wallets to keep you transacting history private.
Extra advice- Try using Nano Ledger S Hardware Wallet. It is quite a secure wallet to handle your Bitcoins. The most attractive thing about it is its low price. For a small, portable, easy to handle, carry and operate, and value for money wallet, it is an ideal choice.
Advantages and disadvantages of Bitcoin
Although the positive and negative factors of using Bitcoin are already discussed, here we will have a detailed analysis on the same.
There are plenty of users who call Bitcoin “Money 2.0” because of the following benefits.
- Decentralization is the topmost reason for the success of this form. Decentralization means that you are not required to pay extra charges or exchange rates even when you are settling international deals.
- There is no Federal Reserve System to elevate interest rates as Bitcoin is not associated with any government interference and manipulation.
- You can track your transactions as this method of Bitcoin is transparent.
- One can start accepting Bitcoins instantly without much struggle. You are not needed to invest money. Neither your energy gets lost in setting up a merchant account nor in purchasing credit card processing hardware.
- You cannot forge it which means your client cannot ask for refunds.
The number of people who hesitate to use this service is not too small. It is because of the following disadvantages.
- Hacking and scams are the most practical concerns of Bitcoin. These are getting further sophisticated and are now following a trend of happening at least once every month. Some most common scams related to Bitcoin are Ponzi scams, Bitcoin Mining Scams, Bitcoin Exchange scams, and Bitcoin Wallet Scams.
- It makes slow transitions. One has to weight for 10 minutes for getting transaction approval. Even some users have reported waiting for hours for their transactions to get confirmed.
What else to know?
Almost all the topics and information about Bitcoins are covered in this context. Reading so long so far, one might have assumed that he now knows everything about Bitcoin that he should. But actually, there is a heap of information remaining. Here we have covered certain short but important concepts related to Bitcoins.
- Performance over the months
From August 2018 to January 2019, Bitcoin has been in a loss, though the latest two months are a sign of greenery to the creators.
- Highest Transaction Fee Collected in the last 10 days
It was on 24th April when the blockchain collected the highest transaction fees of 404,279 with 131 BTC given away as transaction fees.
- The total daily transactions fluctuate between 300,000-400,000.
- Average daily transaction fees
Total transaction fees collected/ the total number of transactions made.
- Average value of each transaction
If the average of all the transaction values reported in the 10 days is calculated, then we get $2002 which indicates that the transaction fee is approximately 0.56% for which PayPal would have charged $58.30.
Now it depends on you whether you want to join the party that believes in Bitcoin or the party which considers it useless. All the aspects are present in front of your eyes. Take your time and come up with the right decision.
- The huge part of Bitcoins that is, more than 100,000 BTC in numbers are owned by only five addresses.
- Around 10,000 to 100,000 Bitcoins are owned by 98 addresses.
- Only 0.0001-0.001 BTCs are owned by 45.5%, a large portion of addresses.
Government taxes and regulations
Bitcoin is among those valuable things for utilization of which government bodies charge taxes. This status of charge on Bitcoin varies from country to country. Even each state has its regulations for taxes on Bitcoin. Surprisingly, certain countries have even banned the use of Bitcoin.
- Current price- $5,495.68
- Market Cap- $97,081,022,717
- All-time high-$19,783.06
- Size of Mempool-10,395,621 bytes
- October 31, 2008- publication of Bitcoin whiteboard
- January 3, 2009- mining of Genesis Block.
- January 12, 2009- the release of Version 0.2.
- November 6, 2010- market cap exceeded $1 million.
- October 2011- forks to create Litecoin.
- June 2012- coinbase launched.
- June 2015- BitLicense, the most significant cryptocurrency regulations established.
- September 2017- ban of BTC trading in China.
- November 15, 2018- market cap fell below $100 billion for the first time in 2018.
- October 31, 2018- 10th year anniversary of Bitcoin.
Reading so far, you might have reached a conclusion for whether you want to take benefit of this service or not. If your decision is yes, we recommend you to install wallet software onto your computer device. This wallet software will allow you to send, receive and transfer Bitcoins. The next step for purchasing Bitcoins is dumped money onto an online exchange connected to Bitcoin buyers and sellers. Once your currency is accepted, you can easily place an order for Bitcoin.
TDLR: Bitcoin is a decentralized network of digital currency that makes transactions to and from 16 character encrypted addresses. Only the owner can transfer funds as these addresses are mathematically secure. Simply, it is a network of independent computers that produce, proliferate, and prove financial transactions.