Introduction
A
software developer called Satoshi Nakamoto, who resides in total anonymity,
proposed bitcoin in 2008. Bitcoin is a form of digital currency
(cryptocurrency), created and held electronically. No one controls it. It is
both a currency, like dollars or euros or yen as well as a way of making
payments, like PayPal or Visa credit card network. The idea behind the bitcoin
was to produce a currency independent of any central authority, transferable
electronically, more or less instantly, with very low transaction fees.
Basically,
bitcoins are just long digital addresses and balances, stored in an online
ledger called the "blockchain." Bitcoins can be broken into tiny
pieces. Each bitcoin can be divided into one hundred million units, called
Satoshis, after the currency's founder. The entry of every transaction is recorded
in blockchain.
Bitcoin
Mining
Bitcoins
aren't printed, like dollars or euros - they're produced by people running
computers all around the world to solve complex mathematical problems. The
mining process involves compiling recent transactions into blocks and trying to
solve a computationally difficult puzzle.The first participant who solves the
puzzle gets to place the next block on the block chain and claim the rewards.
Whenever a new block in the chain of Bitcoin network is found, its owner is gifted
with 50 Bitcoins. Technically, a computer has to perform long and tough hash
calculations to find a new block. The bitcoin protocol - the rules that make
bitcoin work - say that only 21 million bitcoins can ever be created by miners,
which is designed to happen in about the year 2040. There are presently more
than 14.5 million units in circulation.
Transaction
of Bitcoin
Bitcoin
owner owns a private cryptography key that's associated with an address on the
internet that contains a balance in the public ledger. The address and the
private key let you make transactions. If someone wants to send you bitcoins,
they need your address. If you want to send your bitcoins to someone else, you
need your address and their address - but you also need your private
cryptography key.Users can hold multiple bitcoin addresses, and they aren't
linked to names, addresses, or other personally identifying
information.Transactions happen when heavily encrypted codes are passed across
a computer network. The network as a whole monitors and verifies the
transaction, in a process that is intended to ensure no single Bitcoin can be
spent in more than one place simultaneously.
Advantages:
Freedom
in Payment
·
With Bitcoin it is very possible to be able to send
and get money anywhere in the world at any given time.
·
You don’t have to worry about crossing borders,
rescheduling for bank holidays, or any other limitations one might think will
occur when transferring money.
·
You are in control of your money with Bitcoin.
There is no central authority figure in the Bitcoin network.
Control
and Security
·
Allowing users to be in control of their
transactions help keep Bitcoin safe for the network.
·
Merchants cannot charge extra fees on anything
without being noticed. They must talk with the consumer before adding any
charges.
·
Payments in Bitcoin can be made and finalized
without one’s personal information being tied to the transactions.
·
Due to the fact that personal information is kept
hidden from prying eyes, Bitcoin protects against identity theft.
·
Bitcoin can be backed up and encrypted to ensure
the safety of your money.
Information
is Transparent
·
With the block chain, all finalized transactions
are available for everyone to see, however personal information is hidden.
·
Your public address is what is visible; however,
your personal information is not tied to this.
·
Anyone at anytime can verify transactions in the
Bitcoin blockchain.
·
Bitcoin protocol cannot be manipulated by any
person, organization, or government. This is due to Bitcoin being
cryptographically secure.
Very Low
Fees
·
Currently there are either no fees, or very low
fees within Bitcoin payments.
·
With transactions, users might include fees in
order to process the transactions faster. The higher the fee, the more priority
it gets within the network and the quicker it gets processed.
·
Digital Currency exchanges help merchant process
transactions by converting bitcoins into fiat currency. These services
generally have lower fees than credit cards and PayPal.
Fewer
Risks for Merchants
·
Due to the fact that Bitcoin transactions cannot be
reversed, do not carry with them personal information, and are secure,
merchants are protected from potential losses that might occur from fraud.
·
With Bitcoin, merchants are able to do business
where crime rates and fraud rates may be high. This is because it is very hard
to cheat or con anyone in Bitcoin due to the public ledger, otherwise known as
the block chain.
Disadvantages:
Lack of
Awareness & Understanding
·
Fact is many people are still unaware of digital
currencies and Bitcoin.
·
People need to be educated about Bitcoin to be able
to apply it to their lives.
·
Networking is a must to spread the word on Bitcoin.
·
Businesses are accepting bitcoins because of the
advantages, but the list is relatively small compared to physical currencies.
·
Companies like Tigerdirect and Overstock accepting
Bitcoin as payment is great. However, if they do not have a knowledgeable staff
that understands digital currencies, how will they help customers understand
and use Bitcoin for transactions?
·
The workers need to be educated on Bitcoin so that
they can help the customers. This will definitely take some time and effort. Otherwise,
what is the benefit of such large companies accepting Bitcoin if its staff
doesn’t even know what digital currencies are?
Risk and
Volatility
·
Bitcoin has volatility mainly due to the fact that
there is a limited amount of coins and the demand for them increases by each
passing day.
·
However, it is expected that the volatility will
decrease as more time goes on.
·
As more businesses, medias, and trading centers
begin to accept Bitcoin, its’ price will eventually settle down.
·
Currently, Bitcoin’s price bounces everyday mainly
due to current events that are related to digital currencies.
Still
Developing
·
Bitcoin is still at its infancy stage with
incomplete features that are in development.
·
To make the digital currency more secure and
accessible, new features, tools, and services are currently being developed.
·
Bitcoin has some growth to do before it comes to
its full and final potential.
·
This is because Bitcoin is just starting out, and
it needs to work out its problems just like how any currency in its beginning
stage would need to.
Conclusion
We always
have both sides of the coin. Bitcoin is also not perfect. It does have many
advantages that physical currencies do not provide its users; however, it also
has its disadvantages. This is mostly due to the fact that Bitcoin is still a
relatively young and new currency. People are just beginning to become more
aware of it. In order for Bitcoin to succeed, more people need to understand
what it is and not let their preconceived notions distort the concept of
digital currencies.
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