The more bitcoin gains in value, the more and more people flock to buy more bits. And every week we see bitcoin charging higher and higher. It seems that everybody is in love with Bitcoin. But what exactly is bitcoin? Are you someone who has heard the word bitcoin but doesn’t know what it actually is? Do you want to learn more about Bitcoin? If that’s you, then this article is for you.
What is Bitcoin?
Bitcoin is a fully virtual form of currency (popularly known as cryptocurrency). It’s like having cash on the internet and it’s often referred as internet money.
How does Bitcoin really work?
Think of Bitcoin as a file stored in your online wallet. Every time you perform a transaction, bitcoin gets transferred between two parties and it’s recorded on a public list. This forms the Bitcoin blockchain.
Example – Let’s say you bought something and paid in bitcoin to the seller. Now this transaction forms one block.
Your bitcoin has virtually changed its address and your bitcoin is now with the seller.
Now your seller goes on to make a purchase and pays with the Bitcoin you paid him with. Again this transaction means that the ownership of bitcoin has changed from seller to someone else. This transaction will also form a block of it’s own. And together, the first block and this current block will form a chain. This is how a blockchain is formed.
So basically any blockchain shows how a Bitcoin changed addresses, from one wallet to another. This promotes transparency as every transaction can be traced to its initial transaction. That’s one reason why everybody is going crazy for blockchain technology – Transparency of transactions.
Blockchain is a public list which records each and every transaction carried out on the platform.
If blockchain is a public list, doesn’t it mean anybody has access to my data?
No, nobody has access to your data. All the transactions on the blockchain are encrypted using cryptography.
So until and unless somebody knows the address of your bitcoin wallet, they won’t be able to find out in which transaction you took part.
This is how bitcoin works – Every time you make a transaction, a blockchain is formed. And this blockchain keeps getting bigger when more transactions are initiated.
Do you think it would be possible to trace the first address of bitcoin with the help of blockchain?
Absolutely, why not? The blockchain holds a record of how a particular bitcoin changed hands from one address to another. Like mentioned before, this promotes transparency, one thing which most of the democratic world is crying for.
How can you get bitcoins?
There are three main ways to earn bitcoins –
- You can buy Bitcoins by paying “real cash”. You can buy bitcoins from cryptoexchanges like KraKen(International), WazirX(India) or Zebpay.
- Sell and get paid in bitcoins. Maybe if you’re Elon Musk.
- Mine new coins with your computer – Bitcoin mining
You can put your computer to solve complicated sums and as a reward you might be given bitcoin by the system. But not only are the sums hard, but it could take your computer more years and resources to mine bitcoin than bitcoin’s real worth. It’s unrealistic for the majority of the population. And as more bitcoins are mined, the sums get harder. This makes it increasingly difficult to mine and earn bitcoin.
Why does the majority love Bitcoin?
- The blockchain system promotes transparency. Every transaction can be traced to its origin(like we saw in the example).
- In a public blockchain like bitcoin, the power lies with every participant on the blockchain like true democracy. There’s no central authority who controls bitcoin.
- In modern days, Bitcoin has become a symbol of rebellion against authority. This is one reason why so many people are attracted to Bitcoin.
- Bitcoin prices are going to rise and the majority wants to make a fortune out of it. That’s another reason why everyone is jumping on the Bitcoin train.
Will Bitcoin be the future of money?
It depends on how many people will adopt bitcoin as a legal form of payment. If more people, especially big companies start to adopt the Bitcoin model of payment, then things are very bright for Bitcoin to be the future of money.
On the other hand, if people don’t use Bitcoin as a legal form of payment, then it’s unlikely that Bitcoin will be the future.
Fundamental Value of Bitcoin
The prices of bitcoin keep fluctuating every month but that’s not where Bitcoin’s true value lies. One month it’s up and the other month it’s down. These are short-term changes and it’s not where the real value of Bitcoin lies.
Adoption of bitcoin as a payment method is the key to it’s future. And that’s where the fundamental value of Bitcoin lies – in it’s adoption.
What are the main threats to Bitcoin?
Once you understand the concept of Bitcoin, it’s easy to understand who’ll be against the adoption of Bitcoin –
- Major financial institutions and the government – They hate decentralization of power, which is what bitcoin stands for. In some countries, the governments have bought strict regulation over Bitcoin. Any form of authority will challenge Bitcoin.
- Big corporates and media giants – Again, anyone with authority is betting against Bitcoin. Apple prevents users from sending Bitcoins via the wallet in the AppStore. Google too doesn’t allow in-app payments with bitcoin.
- Scamsters – With the prices rising every day, scammers see bitcoin as a Ponzi scheme to get rich quick. But that’s not what Bitcoin stands for. The more people lose money in the market, the more the government will crack down on Bitcoin. That’s why scamsters are a one of the main threats to Bitcoin adoption.
- Illegal marketplaces – Bitcoin is an accepted form of payment in a lot of illegal marketplaces. This is one major reason which governments use to highlight the negative side of adopting cryptocurrency. And rightly so.
I hope this article enlightens you about Bitcoin as a cryptocurrency.
Disclaimer – I’m not a financial advisor or a legal advisor. I’m just a writer with ideas. Please do your own research before taking any decisions related to cryptocurrency and Bitcoin.