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Bitcoin - One of the hottest topics in vogue that is currently doing the rounds among entrepreneurs, investors, businessmen and stock traders; almost everyone is wrapping their heads around Bitcoin, a form of cryptocurrency. Before you set out to explore the world of cryptocurrencies, there are a few things you should know. Let's look at the top 10 things to know about Bitcoin.
- For beginners, Bitcoin is a digital currency that is not governed by any governing body or financial institution. Bitcoin was produced by "miners," who employ computing devices and specialized hardware to cipher dealings, safeguard the currency's system and gather bitcoins in exchange. The price of bitcoins fluctuates, depending on how much people want to pay for it. In its initial stage it was traded in pennies, however today one bitcoin is approximately US $7175.
- Bitcoins can be traced back to the year 2008, when its founder and initial creator Satoshi Nakamoto developed the original bitcoin client as a proof of concept. The proof was then issued in a cryptocurrency listing in 2009. When Nakamoto exited the project in 2010, other developers from around the world picked up the work to progress it further.
- Bitcoins run on a system that allows one to send and receive bitcoins without a third party through peer-to-peer system. To put it simply, world currencies rely on financial institutions or payment processers such as MasterCard or Visa to verify a transaction. This helps in ensuring that payment has been sent or received. However, bitcoin transactions are registered in a public ledger known as the bitcoin block chain. These transactions can be publicly examined on blockchain.info without the data being deleted or edited, thus making it permanent. This guarantees that the transaction records serve as proof of transaction. Bitcoin have been programmed to be non-duplicable that makes double spending highly unlikely.
- No single entity control bitcoins. The general opinion is that currency and money is tangible and is controlled by banks and governments, while its rise and fall is based on its value in the global market. However, bitcoins defies all of these factors and is a decentralized currency with no group, government or individual holding authority over it. This makes bitcoins a universal currency, without a central command that is free from geographical boundaries. However at the same time, a number of countries are clearly untrusting of bitcoins and cryptocurrencies on the whole, due to the lack of control and regulations over it.
- Bitcoins can be employed similar to any other currency. An increasing number of investors are looking to park their funds in crypto currencies such as bitcoins for investment purposes while some others prefer bitcoins as a method of international money transfer.
- Since bitcoins are traded on the Internet, they exist electronically and are stored in bitcoins wallets or digital wallets. Since bitcoins are digital pieces of code rather than actual paper or coin currency, it can be used by people to trade real goods and services online and also in some physical stores. However, contrary to popular notions, bitcoins are not infinite in existence but rather there are exactly 21, 000, 000 coins in circulation.
- Every transaction is transparent. All transactions and amounts are publicly accessible on the block chain that gives bitcoins its transparency while instilling trust and security amongst the bitcoin community. However, no personal data is published on the block chain website.
- Bitcoins can be earned or mined by using computer programs to work out mathematical questions and confirm various transactions around the world. People who solve these problems are paid a certain number of bitcoins and these are known as bitcoins miners.
- Bitcoins can be transferred with negligible or no fees at all. If you are looking to transfer money to a friend in Japan and you were based in the United Kingdom, you have to pay currency conversion fees, bank transfer fees and other service fees. Moreover, your friend may have to wait a couple days before the money becomes available in his account. With bitcoins however, there are very little or no transaction fees and currency transferred is available instantly.
- Losing a bitcoin wallet is irretrievable. If bitcoins from a digital wallet are lost, it is lost forever. Although it is impossible for anyone to take money from the wallet without the individual actually giving it away, if the individual loses the bitcoins along with the wallet, then the bitcoins and the wallet are essentially taken away from circulation forever.
Although it might sound improbable at first, bitcoins is an actual currency and can now be used to purchase real things across the world. A variety of online merchants now accept bitcoins as payment for their goods. For instance, bitcoins can be used to buy gold bullion, donate to charity, and can even be used in restaurant and hotel chains.As any investment, bitcoins and digital currencies may involve the risk of loss. As a virtual currency, it could carry critical risk to investors and consumers and hence great caution must be exercised when dealing with crypto currencies such as bitcoins.