You may have come across the word “bitcoin” in many news publications over the last few days. This highly trending topic offers a prolific base which can be explored. That is why we have decided to offer you a better insight into the phenomenon and its future.
What is bitcoin?
Bitcoin is a new kind digital currency which was created nearly five years ago in 2009. The person behind this innovation is referred to as Satoshi Nakamoto. However, his real name continues to be a mystery. What is characteristic about this currency is that it does not rely on banks. This means that bitcoin transactions do not involve a middlemen party. In addition, those who use bitcoin as a payment method do not even need to give their real name or to pay any transaction fees. Apart from anonymity, bitcoins offer a lower price. That is due to the fact that they are not connected to a regulatory organization or a country.
How does it work?
Those, who want to buy or sell bitcoins, can do that through bitcoin exchanges. They accept different currencies, the biggest of which is called Mt. Gox. Bitcoin transfers are also very easy and simple to make. If you want to transfer a sum in this digital currency, you just need a computer device or even a mobile application. The operation itself resembles that of digital cash transfers.
Apart from buying and selling bitcoins, you can also mine them. For this purpose, you need to find solutions to various complicated mathematic puzzles. Actually, this is the processes with which this currency is created. Those who succeed in this task are rewarded with bitcoins.
Once you become an owner of bitcoins, you can store them in a digital wallet. The wallet itself can be stored on the person’s computer or on the cloud. However, in contrast to bank accounts, bitcoin digital wallets are not insured.
Who can buy and sell bitcoins?
Pretty much anyone with a computer device and some knowledge on digital transactions can use this currency. It is a simple and fast way to purchase and sell things. That is why more and more consumers and merchants are staring to adopt it. Some small businesses see bitcoins as a good payment alternative since it involved no fees.
Advantages
As it was already mentioned, bitcoins offer anonymity. It uses only the ID of the digital wallet of bitcoin buyers and sellers and it never reveals their true identity. Another great advantage of bitcoins is that they can now be used for the purchase of more and more items and services. You can use this digital currency to buy anything from food products to art masterpieces, Also, you can even pay your to your legal representative or hairdresser with them, or to even book a flight. One of the most recent big purchases made with bitcoins was a Tesla Model S. The price of the car was $103,000 which is 91.4 bitcoins. Thanks to this payment method, the buyer preserved his or her anonymity.
Disadvantages
The anonymity offered by this currency is a two-edged sword. Tracking bitcoin buyers and sellers is almost impossible. As a result, some people use the currency for different illegal practices like buying drugs, for instance.
In addition, the Financial Times informed that bitcoins have triggered a rise in the amount of cyberattacks. The digital currency makes it easier for hackers to make the so-called ransomeware attacks. In them, they encrypt the information on a user’s computer device and restore the access to the data only after they receive a payment. The majority of them insist that payments should be made in bitcoins. Only during the last quarter of the year, the number of such recorded cases surpassed 300,000.
Also, bitcoins are neither backed or regulated by any country. In other words, the law will not assist bitcoin sellers and buyers or to offer a solution in case of a liquidity crisis or a crime against them.
Another downside of this digital currency is its volatility. The most recent example of that involves the largest search engine platform in China, Baidu. The company just announced that it will no longer accept the digital currency bitcoin as a form of payment. The reason for that were the big fluctuations in the value of the currency. Towards the end of November, bitcoin’s price reached $1,000 for the very first time. Not long after that, it hit $1,200. Nevertheless, it then quickly fell to $700 and lower.
Does it have a future?
The answer to this question is hard to give. It is almost impossible to predict whether bitcoins will continue to be used in the future. Although the currency offers may advantages, it also hides many risks because it is mainly unregulated. However, if it gains more popularity, this might change. Many countries are already worried about the effects of this uncontrolled currency and they would certainly make a stand if its rise continues in time. Even though bitcoins might not replace real currencies any time soon, they may stick for a quite while. After all, many of the financial innovations on which we rely today, like digital cash transfers, were hardly accepted at the beginning. Therefore, we should keep an eye on bitcoins.
