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What is Bitcoin?

5 min read




The global interest in Bitcoins has grown, and it has never been as popular as today. Its demand has increased as more people now understand the benefits and opportunities with bitcoin. Well, when the wealthiest person in the world, according to Forbes, Elon Musk, gives his support to a virtual currency, you know it's a big business.

Bitcoin, also known as cryptocurrency, a virtual currency or a digital currency, is a type of money that is entirely virtual. Bitcoin was the first decentralized digital currency giving ownership to the user. It works like cash or gold that can be transferred on the internet across the globe. It is a digital currency that allows you to buy, sell and exchange directly. Not only is Bitcoin the first cryptocurrency, but it is also the best known of the more than 5,000 cryptocurrencies in existence today.

Bitcoin is an online version of cash. This means that you can send money person-to-person without an intermediary or involvement of any third party as you avoid expensive fees and long waiting times at the bank. Bitcoin's creator, Satoshi Nakamoto, originally described the need for an electronic payment system based on cryptographic proof instead of trust.

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Bitcoin can be described as independent because no state, bank, or institution can control or manipulate it. It is global because everyone can send money faster and at lower prices 24/7 to any corner of the world. It is also public because all transactions are stored in a shared ledger. It is anonymous because everyone can participate without having to identify themselves.

When Did Bitcoin Start?
The idea behind Bitcoin was introduced to the world on October 31, 2008, as the depth of the financial crisis by a person known as Satoshi Nakamoto. Nakamoto posted a message on a cryptography mailing list titled "Bitcoin P2P e-cash paper". In it was a link to a white paper called "Bitcoin: A Peer-to-Peer Electronic Cash System." In his writings, Nakamoto laid out the concept for Bitcoin as a decentralized, digital currency. Being decentralized means, there is no single administrator but rather a public ledger of transactions that anyone can store in their computer.

On January 3, 2009, 30,000 lines of code spell out the beginning of Bitcoin. Since then, Bitcoin has experienced significant highs and lows. Bitcoin uses blockchain technology which has outperformed gold by generating a 155% annualized gain over gold's 6% annualized loss over the last 5years.In the past year, the currency has risen to record highs of around $50,000. The Bitcoin software is free and available online to anyone who wants to run a Bitcoin node.

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How Does Bitcoin Work?
As a new user, you can get started with Bitcoin without understanding the technical details. Once you've installed a Bitcoin wallet app on your mobile phone or computer, it will generate your first Bitcoin address, and you can create more whenever you need one. This is quite similar to how emails work. Each Bitcoin is a computer file stored in your 'digital wallet' app on a smartphone or computer. People can send Bitcoins to your digital wallet, and you can send them to other people.

Every transaction is recorded in a public list known as the blockchain, making it possible to trace Bitcoins' history. This helps people from spending coins they do not own, making copies, or undoing transactions made.

How you can get Bitcoins is something else you would need to know about. There are three main ways people get Bitcoins. You can opt to buy Bitcoins using 'real money; you can also sell things and let people pay you with Bitcoins or be created using a computer.

Reasons Why You Should Consider Bitcoin
There are various reasons why you should consider using Bitcoin instead of using your credit or debit card or even cash. Bitcoins tend to be valuable because people are willing to exchange them for authentic goods, services, and even money. Below are some of the benefits of using Bitcoin.

1. It is a Secure System
Most people may opt not to try it because they are unsure whether the cryptocurrency is secure enough. No need to worry as Bitcoin is safe because it is based on cryptography and mathematics. It is impossible to counterfeit. The current financial system is secured by-laws which will always contain loopholes. There is no way of duplicating a Bitcoin, unlike cash.

Additionally, the ledger ensures that all transactions between digital wallets can calculate an accurate balance. All transactions are checked to make sure that the current spender owns the coins used. This public ledger is also referred to as transaction blockchain, which ensures secure digital transactions through encryption, making the entity virtually unhackable and void of fraud.

2. It is Anonymous and Lacks Intermediaries
Online payments made with your credit card are not always easy as they lack confidentiality, even in cases where you would want that confidentiality. You must provide personal information very often. With Bitcoin, you will not have to worry about this.

Bitcoin is entirely anonymous but transparent at the same time, as you do not need to identify yourself in the Bitcoin network. It is transparent as the ledger of all transactions is public. You also do not need to trust any third-party persons. No intermediary can deny your transaction or even demand expensive fees. You do not have to rely on any individual or company as you have the power to control your own money.

3. Protection against Inflation
Perhaps this might be the most significant advantage of using Bitcoin. This is because your money is protected against any inflation as Bitcoin has a limited supply to preserve the value of your money. Today, many investors turn to Bitcoin for safety, fearing that the prices will rise a lot faster over the next decade than most of the anticipated, and so should you.

ALSO READ | Bitcoin As A Form Of Payment

Summing Up!
Bitcoin today is considered the top cryptocurrency in the world by market value. If it wasn't evident to you, I hope this article has allowed you to discover some of the reasons why it is beneficial to use Bitcoin instead of cash while convincing you to take the plunge!