Bitcoin is a cryptocurrency invented in 2008 and first launched in 2009. It may not seem like a long time ago, especially if you consider how important it has gotten and basically changed the fin-tech world. More and more people decide to see what this is all about – they start buying, selling, trading, or even mining, trying to get something for themselves in this craze.
And what is all that for? Well, examples are endless. You can try buying and selling for profit to exchange it for a fiat currency of your choice and actually see your money; you can play online bitcoin slots using mybitcoinslots.com; you can pay for items and services, as the rising number of companies starts to accept bitcoin as payment (including such giants at Microsoft, Overstock, or many American BMW dealerships; even Wikipedia accepts donations in bitcoins).
How is that even possible? How can a digital cryptocurrency be this valuable, profitable, desirable?
How Does Bitcoin Work?
Bitcoin is a digital currency (or a cryptocurrency, or a virtual currency), but, contrary to what its name may suggest, it does not have any physical representation – no coins, no bills. Also, when you manage your bitcoins, it’s a bit different from having a bank account with a specific amount of money assigned to you and held by a bank. So, how can it have any actual value?
Bitcoin works thanks to a global peer-to-peer network. Its members verify individual coins, which gives the coins their credibility and, therefore, value. This part is called bitcoin mining; it’s a process that, if you’re lucky and ready to commit, can bring you some real money. All bitcoin activities require computing power to be processed, so miners provide their computers to verify individual transactions and get brand new bitcoins in return.
It’s supported by a carefully designed source code based on cryptography, which makes it essentially impossible to break.
If you own any bitcoins, you keep them in your digital wallet, which is encrypted and private. When you pay, the transaction is verified, and bitcoins get transferred to a store or another service provider, just like when you pay with your debit or credit card. The difference is that a middleman is not a bank. There are no fees, and transactions are stored in the blockchain, a public list with encrypted data.
The Advantages of Bitcoin
Now that you know how bitcoin and blockchain work, you probably wonder what it means in practice. How are digital coins different, and for many people better, than real money?
Privacy and Anonymity
The list of transactions is indeed public, but the system was designed to display only the data relevant to the system’s overall security without revealing the private identities of its users. Each holder of a bitcoins gets a key or a code to be identified among other users without sharing personal information. If you’re a bit more tech-savvy, you can do even more to conceal your flow and sources.
Easy International Transactions
With bitcoin, there’s virtually no difference if your transaction stays in your country or goes abroad. Everyone who’s ever had a bank account knows what a big deal it is to do an international transfer via bank. Bitcoin doesn’t have any additional fees for overseas transfers, and they are as fast as any other payments.
Easy Exchanges and Lower Fees
Bitcoin allows its users to exchange coins for fiat currencies, such as dollars, pounds, and whatever may come to your mind, but that’s not all. With bitcoin, you can also access other, normally unavailable cryptocurrencies. The regular fee usually is even less than 1%, as exchanges are as profitable to bitcoin as to its users – liquidity allows bitcoin to stay in the game and keep its value in relation to other currencies. However, if you plan to exchange bitcoins, note that it’s not the most stable currency, and weekly fluctuations of even 50% are not uncommon.
Independence from Politics
While it may sound like a bizarre reason to give up money and switch to a digital currency, bitcoin’s independence is actually attractive to many people around the world. Because bitcoin is decentralized, it can’t be controlled by any political power, bank, or even the central bank. It also makes it more difficult for any entity to freeze or take your coins aways, which is a considerable danger even for regular people, not criminals, living in oppressive countries.
Bitcoin Is Worth Your Attention
There’s no doubt that bitcoin is undoubtedly worth anyone’s attention. Some people speculate that cryptocurrencies may be the future of humanity, and it’s how we will manage our finances. It’s too early to say anything for sure, but all cryptocurrencies, bitcoin especially, have definitely become a big part of both the financial and technological worlds. Therefore, it’s good to know some basics and stay up to date, even if you are still reluctant to try it yourself.