A new form of currency that came about recently which changed the way people perceive investments and trade is Bitcoins.
Basically, Bitcoin is a type of digital currency which uses electronic means. What makes Bitcoins so interesting is that it is no like any other physical currency which are neither printed nor produced. Created and maintained electronically, it has become one of the major revolutions in recent years.
First type of cryptocurrency
A distinctive feature of Bitcoins is that it is not controlled by anyone. It is in some way, user-generated and maintained. Software applications are used to calculate and ensure security when it is used or traded.
What is Bitcoins used for?
Typically, Bitcoins are like any other currency that exist in the world, except that it does not have a physical form. With Bitcoins, you can:
- Make purchases
What makes Bitcoins so special?
One word distinguishes Bitcoins from every other form of currency in the world. it is decentralized. This means that no bank controls or regulate it. Developed by Satoshi Nakamoto, the idea behind Bitcoins was to have an independent currency and this has been a hugely successful project.
How is it produced?
The term coin is used which means there would be some form of ‘mining’ involved. Computers are used to process the transactions of this virtual currency and in return ensuring that its payment network becomes effective.
Would this then mean that there can be an unlimited number of Bitcoins being mined? According to the protocol specified, miners can only produce up to a maximum of 21 million bitcoins. That is the maximum number of bitcoins which can exist at any time. However, these coins can be further divided into what is known as ‘Satoshi’s. that would be a one hundred millionth of a bitcoin.
So, what is the basis of Bitcoin?
While conventional currency are developed based on the amount and price of gold or silver, bitcoin used mathematical algorithms. These software programs are being used globally for bitcoins to be produced.
Highlights of Bitcoins
The following are what sets Bitcoins apart from conventional currencies:
- It is not centralized – the entire network governing Bitcoins does not come under anyone’s control. It is collectively created and maintained by the machines that are designed to mine for bitcoins as well as in processing the transactions. In other words, Bitcoins are not subjected to any form of policy in monetary issues.
- Easy to manage – One of the biggest problems for merchants when it comes to trading is opening a bank account. If the red-tapes do not turn you off, the time and process will. With Bitcoins, setting up can be done within minutes after registration and the best thing is that there are no fees involved.
- Anonymity – As a user, you can have several Bitcoin addresses. One of the good things about Bitcoins is that your addresses need not be linked to your personal information or that which could be detrimental to you. It can be a purely merchant-based account.
- Transparency – A blockchain is used in Bitcoins. This is some form of a huge general ledger that logs all the transactions. This does not mean that people will know everything about you. If you store your bitcoin in a public address, it can be seen but without the information of who owns it.
- Fees – Transferring funds have never been cheaper. There might be some charges involved but it would never be as high as those imposed by conventional banks
- Speed – with Bitcoins, transferring funds is fast and efficient. After all, you are using a computer to carry out this transaction and the network is a collection of computers
Current issues behind Bitcoins
A lot of talk has been going around on Bitcoins. After all, this has been a revolutionary product that has taken the world by storm which potentially changed financial markets. As such, it has garnered a lot of media attention. One of the issues that came out was around 2011 when criminal traders used it for money laundering. The value of bitcoins went through the roof then when they bought batches of Bitcoins in millions to move their money around.
So what did that teach us? With Bitcoins, the power of producing money has been removed from the federal banks of the country. In fact, the general public has been given some form of power to produce money. Unlike standard bank accounts, Bitcoin accounts do not come under the jurisdiction of any legal system. This means that no one can freeze your bitcoin account. Without control or power of the police or legal system on these monetary practices, the sky becomes the limit for criminals and those who are looking to manipulate the system.