Bitcoin, what are you?
So a lot of people asked me Bitcoin related questions so I decided to write an article about it: What are you?
We’ve all heard of bitcoin. Not many have actually owned or used it, but we are aware of its existence, which is already more than what we can say for most of the other crypto-currencies. Bitcoin is not the first digital currency, and it won’t be the last. It is, however, the first one that made it. But this currency is almost as mysterious as its alleged creator, Satoshi Nakamoto. Questions abound: What is bitcoin, exactly? How does it work? Why would we use it and will it ever truly become the norm? Let’s find out:
First and foremost, bitcoin is a crypto-currency invented and designed by Satoshi Nakamoto. However, little is actually known about this man, assuming he even exists. This could be an alias of a hacker or a group of hackers/activists whose true goals are a bit tricky to understand. The true identity of whoever created bitcoin is of no consequence, at least for us. The official idea behind bitcoin, however, is. The idea was to introduce a currency and a payment system that does not depend on any government or corporation, which can be used freely and it was supposed to bring (financial) power back to the people, rather than to accumulate it in the hands of the select few – in theory. In essence, behind all other currencies and commodities, there is a bank, or a state, or an organization that monitors and controls its value. The value of bitcoin depends on the market itself. While bitcoins have no intrinsic value on their own, the same goes for virtually all other currencies in the world today. Dollars, Euros, Pounds, Yens and all other currencies are backed by central governments and their respective economies. Without those, their money would not be worth the paper it is printed on.
In simple terms, a bitcoin is a digital monetary unit of the system with the same name. Smaller units are milibitcoin, microbitcoin and satoshi. Every time you make a transaction using bitcoins, you send an amount of digital currency via a software application to someone else’s account (bitcoin address). This transaction is peer-to-peer, meaning you send the money directly, without any banks or intermediaries. There is a digital trace and a public ledger in which the transaction is noted, but there is no way to access or prevent bitcoin transactions without the private key, and only you can do that (again, theoretically; thefts can and do occur; as do seizures by the authorities). In other words, if you lose the piece of hardware with your private key, you also lose access to any bitcoin you had on your account (your bitcoin address). The network can use a public key to verify the transaction, and that is about it. There is no central authority you can complain to, or any official oversight other than that of a public network, which has brought bitcoin something of a cult status in the criminal circles, since the only way bitcoin can be spent is through a unique, private key and no government can appropriate these funds (allegedly). They can freeze assets, but they cannot use them without the key. Paying transaction fees is optional, but it does speed up the whole process.
The bitcoin network became a reality in 2009, and has been used ever since. In six years, there has only been one security flaw in 2010, and it was soon corrected. Contrary to popular beliefs, bitcoins can be seized, something the users of the Silk Road website found out the hard way in 2013. The price peaked in November 2013 when 1 bitcoin was worth $1,250. Today, it is somewhere between $200 and $300. If you’re interested in trading Bitcoin press here and sign up.
As for the future of bitcoin, it is hard to say for how long this trend will continue. It has been dubbed “the gold of tomorrow” by the chief financial officer of the University of Nicosia, Cyprus, although in hindsight, Greek and Cypriot economists may not be such a good reference, considering the financial crisis during which that statement was made. They may not be the most qualified to talk about economy, period. Regulatory issues, thefts and losses continue to plague the new currency, and any one of those may be the final nail in bitcoin’s coffin. Some say bitcoin is the future of financial markets; others say it’s a scam. Many think it is already a thing of the past. Time alone will tell who is right. It is not unfeasible that bitcoin will pave the way for a new, better crypto-currency, but even its defenders don’t truly believe this is a long-term solution to the issues plaguing the modern financial markets. Those with “real” money, either perceive it as a threat to their financial interests (even lobbying for bitcoin to be outlawed) or laugh it off as a “fool’s gold”. In any case, people are using Bitcoin and so can you. It is an accepted currency, and most legislative bodies either treat it as such, or will do so in the future.
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