What Is Bitcoin? What is Cryptocurrency? How works for all
What Is Bitcoin? What is Cryptocurrency? How works for all.
What Is Bitcoin: You might have heard quite a bit of a story about Bitcoin, a popular cryptocurrency. You might have read about how the currency is changing in value all the time and that it is a currency that is continuing to grow in popularity and importance. But what makes the Bitcoin what it is?
Bitcoin is a cryptocurrency that is changing the global economy. This currency is designed to be utilized as a payment option that may be spent throughout the world. It is an open-source currency that anyone can use. No one has any control over Bitcoin either.
But some risks must also be explored. This guide will look into everything that makes Bitcoin unique and how you can utilize the currency.
What is Bitcoin
The General Concept
Bitcoin was designed to be utilized as a digital currency. People can pay for products or services by using Bitcoin. The cryptocurrency is intended to be the closest thing people have to universal money that can be accepted anywhere.
Bitcoin works as a cryptocurrency that is produced through a unique process called mining. The practice entails working with computers to create packets that can be generated with new coins in them. But the method only works with a limited number of coins during the life of the currency.
The History of Bitcoin
Bitcoin was first introduced in 2008. The currency was developed with open-source software that was utilized to illustrate how the money works. This was produced by an unknown entity referred to as Satoshi Nakamoto.
The blockchain for Bitcoin was established in early 2009 as the first block on the chain, or the genesis block was mined by the Nakamoto entity. While it is unclear as to what inspired the creation of Bitcoin, it is believed that the ongoing issues surrounding the stability of the international banking system at the time might have been a critical factor.
Over the years, people started to utilize Bitcoin for many actions. People began to learn more about the currency as the community surrounding it began to grow.
Many more retailers would start to use Bitcoin as a payment option over the years. But there were also concerns where Bitcoin would be used by many illegal entities due to the currency being easy to trade without being noticed. These include entities involved with the drug trade and other actions.
The value of Bitcoin changed substantially over the years. The cost rose to where a single coin could be bought for $20,000. The most significant change came in 2017 when the value of Bitcoin went from a little under $1,000 at the start of the year to more than $20,000 at the end. But the value fell down in 2018 as the currency went down by more than half its cost. The Bitcoin has moved down to an amount of around $6,000 as of October 2018.
Even with the changes in Bitcoin’s value, the currency continues to be popular. There are about 17.3 million coins available for trade as of October 2018. The maximum supply for coins is listed at 21 million.
The Main Principles
The principles that come with Bitcoin include the following:
- Bitcoin is an open-source currency. The source code associated with producing Bitcoin should be available to all people, thus facilitating mining processes to generate new coins.
- People should have full permission to use Bitcoin as they see fit. The public is not forced into following specific guidelines for using Bitcoin.
- People do not have to use any identification points to use Bitcoin.
- All coins produced are spendable at any place that the currency may be found.
- There is a limit as to how many coins may be produced. Specially, only 21 million coins may be provided.
How Do You Use Bitcoin?
Bitcoin is utilized with several steps in mind. These steps focus on how the blockchain system is used:
A person will acquire the currency. This may be done through an exchange that allows people to purchase coins in exchange for fiat currency.
People can get as large or small of a bitcoin investment as they want. A person could get a small portion of a single coin. Considering how a bitcoin will be worth thousands of dollars, it is sensible to allow people to exchange these currencies with a small total in mind.
The currency will then be traded through a series of keys. Public and private keys are needed.
The blockchain system works in that a transaction will entail the production of a new block on the chain. The neighborhood includes information on the entities transferring the currency and the value of the sale. The specific code for the coin should be included, as well.
The public and private keys in the currency allow for a full transaction to be made. The public key identifies the person who is completing the bitcoin transaction. The private key confirms that person’s identity. Both sides have to complete the transaction with their own public and private keys.
Also, a bitcoin wallet is needed for completing the bitcoin transaction. The portfolio is a program that includes the public and private keys. A person will log onto one’s wallet or provide the proper codes for the wallet if that unit is kept offline.
An absolute value is transferred between one party and the next after the proper keys and descriptions are listed.
The total value of the currency transaction should be ordered at this point. This can be as large as it has to be so long as the one person paying in bitcoin has enough of that currency to handle the deal.
A fee may also be included in the transaction. The extra charge is often utilized to maintain the blockchain or for the convenience of whoever is taking in the currency. Fortunately, the fees associated with Bitcoin trades are minimal in most cases. The cost may be equal to a couple of cents of fiat currency.
The transaction will move through the Bitcoin network.
The Bitcoin network includes an extended series of computers that have the entire blockchain ledger for the currency on hand. These computers are called nodes. Several nodes will analyze the transaction and then approve of the trade. The process will take as many nodes are needed, but the process should not assume that long. It may take a few seconds or minutes to complete depending on the value.
The blockchain network ensures that there are no centralized bodies involved with the currency. Bitcoin can be traded by anyone without worrying about the money being hacked or utilized improperly. Multiple nodes will allow the transaction to move through, thus preventing there from being one spot that a hacker might try to enter.
The transaction will be complete after a proper receipt of the trade works.
Each side of the transaction will get a receipt of what the trade entailed. The receipt should include updated information on one’s Bitcoin account. A QR code may also be incorporated when a person wants to scan the data on one’s name to complete a trade.
Where Can Bitcoin Be Spent?
Most of the transactions people make for Bitcoin can be handled online. People can use online trades to make it easier for the currency to move along on the market. Personal or private actions between one another can be serviced online, although physical wallets that allow people to use QR codes for trades can also be utilized for in-person trades.
QR codes are utilized on physical wallets to allow trades to move along without worrying about having one’s Bitcoin data online. These QR codes may be read off of a sheet of paper, a hardware device that links to a computer, or a smartphone app.
The total number of retailers around the world who accept Bitcoin is unclear, but it is believed that thousands around the globe take in Bitcoin as a payment option. Overstock.com is a famous champion of Bitcoin payments, for instance. The retailer, which offers various furniture and fashion items, has gone so far as to accept payments in Bitcoin and other cryptocurrencies like Monero and Ethereum.
The digital technology store Newegg and the travel service site Expedia accept Bitcoin as a payment choice. Reeds Jewelers, More Stamps Global, CheapAir, and Dish Network also accept Bitcoin payments. Smaller stores that operate off of the Shopify platform can choose to accept Bitcoin as payment.
Some retailers use different plans for how Bitcoin can be used for payment purposes. PizzaForCoins is one particular example. The site verifies pizza spots and takes in cryptocurrencies that people use. The currency is then converted by PizzaForCoins into a fiat currency that may help with paying for the pizza delivery or carryout service one wants. A fee is added to the charge as a convenience cost.
How Is Bitcoin Produced?
Bitcoin is produced through a practice known as mining. This works in that a verification process is generated through the use of a math equation. The open-source nature of Bitcoin ensures that people can use the currency to their liking. More importantly, people can use the Bitcoin after they mine the coin.
The mining process entails many steps:
- A large computer is required. This includes not only a large processor but also a large Graphics Processing Unit or GPU.
The computer has to be compelling to ensure it can handle the power needed for mining the currency.
- A copy of the blockchain should be downloaded.
The blockchain is massive in size, with the currency having millions of coins. The blockchain copy should also be online at all times. The mining computer may be used as a node.
- A software program is needed for the mining process
A mining program works by handling the general equations required for producing new coins. Today’s applications can be found for free, with Bitcoin being an open-source system.
- The miner must get a Bitcoin wallet ready.
The software has to be linked to a Bitcoin wallet, so the person who mines the currency can collect the funds that are produced.
- Over time, the computer will have to work on the software program for resolving equations for opening Bitcoin packets.
- The node that resolves the equation in the blockchain will receive the proper reward from the chain. The award includes a series of coins.
The most important part of the mining process is to be quick and convincing. Only the most active nodes that use the best hardware for mining Bitcoin can resolve the equations to get the rewards produced.
The rewards that are produced come off of a new block that is generated. As of 2018, a computer that opens a block will be rewarded with 12.5 Bitcoin.
How Do You Acquire Bitcoin?
Bitcoin can be acquired in many ways:
- Through private transactions
- By acquiring it through an online exchange
- By using a physical Bitcoin ATM
- Ordering a gift card or prepaid card that supports Bitcoin functions
You would have to review the acquisition process carefully for each choice. A Bitcoin wallet is needed for each of these. You can also get a printout to produce a new paper wallet if you use an ATM.
How Many Coins?
Bitcoin is heavily limited to where only 21 million coins will be produced. As mentioned earlier, more than 17 million of those coins have been provided as of the middle part of 2018.
The limits on the number of coins involved are produced as a means of increasing the value of Bitcoin. By having fewer coins available, there becomes the potential for Bitcoin to become a more desired commodity. This comes as the currency will not be as accessible as others.
The number of coins that are produced in each block will also decline over time as the currency becomes scarce. In 2018, a person who mines a block will get a reward of 12.5 Bitcoin. This is a change from what occurred a few years back when a person got a bonus of 25 Bitcoin for each block.
Over time, the number of coins that will come in each block will be cut in half. The move is based on the number of available coins. In 2021, the blocks are estimated to produce only 6.25 Bitcoin each.
This development is concerning as it will be harder for people to get more Bitcoin through mining processes. The equations for mining will become more complicated, while the rewards become smaller. But this may also cause the value of the currency to increase.
What Influences the Value?
It is difficult to figure out how the value of Bitcoin works, as this currency’s value changes based on speculation. That is, people who trade the money will determine the value based on certain changes in the market, how the currency is regulated or accepted, and any developments in the industry. This means that the cost of Bitcoin could be very high after a while, but there is always the chance that the currency might drop over time. Seeing how the value of the currency rose dramatically in 2017 and fell to earth in 2018, there is always the chance that the money might experience a dramatic shift in its value.
Pros of the Bitcoin
There are many positive aspects of Bitcoin to note:
- The decentralized nature of Bitcoin makes the currency easy to trade and utilize.
- The number of parties that are accepting Bitcoin for transactions is increasing.
- Bitcoin can be easy to access and utilize with many wallet choices available.
- The liquid nature of Bitcoin makes it so the value can change quite well over time.
- Bitcoin may prove to be a more secure option for trading than traditional money, especially with economies and banks often struggling.
- Bitcoin can also be utilized in many parts of the world, including places where traditional banking mechanisms are either unavailable or not easy to use.
Cons of the Bitcoin
In addition to some great positives, there are also some negatives about the Bitcoin to review:
- Bitcoin is not always easy to produce, with the mining process taking a while and often being cost-prohibitive. The need to get a massive computer for the task can also be tough to handle.
- Bitcoin is often used for any illegal transactions. The ability to keep trades anonymous means that people could use it for money laundering activities or for trading drugs or weapons or facilitating human trafficking functions.
- Wallets can be tough to use, especially if someone loses a password. The Bitcoin one could be lost forever if one cannot get access to the correct password.
- The instability of the Bitcoin value can be a prohibitive concern.
A Final Word
Bitcoin has changed the world of commerce forever, thanks to its unique layout. Take a look at what you can get out of Bitcoin when you’re aiming to get an exciting cryptocurrency, but be aware of what might come about with the currency as you use it.