Most people have heard the word “Bitcoin” or “bitcoins”, so you may ask, why is there so much of hype around this term? Actually, bitcoin is a digital currency, and to be more precise, it’s a type of cryptocurrency. This means the implication of security and encryption is highly important for this currency.
As you read on, we will try to make your understanding about bitcoins clearer. We will breakdown answers to the top questions that tag along with it.
Answers to Important Bitcoin Questions Asked
1. What are bitcoins? / What is Bitcoin?
Actually, there are two bitcoins. First is the Bitcoin (“B” capitalized), which refers to the network, or software (the Bitcoin Network that enables the payment system). The second, bitcoin (“b” lowercase) refers to the digital currency, held and created electronically. No one has control over it and no one prints it out like usual currency notes. People produce them, businesses, and computers all over the globe using software that solves mathematical problems.
2. What Makes It a Different Currency?
Compared to printed currency, bitcoins work electronically. This means you can use them to buy stuff electronically. They are similar to conventional notes; in the sense that you can use them to trade for things. The only difference is trades go on “digitally”.
However, the most important characteristic that makes it different to usual money is that it is decentralized. There isn’t a single institution controlling the Bitcoin Network. This is actually quite good because it means a large bank doesn’t have control over your money!
3. Who’s the Mastermind Behind “bitcoins”?
Satoshi Nakamoto, a software developer proposed the concept of bitcoin, an electronic payment system that works on mathematical proof. However, his details remain anonymous. His idea behind was to create a currency that won’t be dependent on any central authority. It would be transferable instantly with minimal transaction fees.
4. Why are Bitcoins so Special?
This form of currency works on a peer-to-peer system, which allows you to receive and send bitcoins without any third party. Unlike fiat currency, which requires a bank to record transactions, bitcoins require a public ledger known as the “bitcoin blockchain”. Once a transaction takes place, the information becomes permanent and viewable publicly on blockchain.info. Once done, you can’t delete or edit it, meaning this serves as a proof of the transaction. What makes bitcoins special is they are programmed in a unique way to non-duplicate, meaning double spending is something about which, you don’t need to worry.
5. How to Acquire Bitcoins?
If you wish to acquire bitcoins, there are three ways to go about this. Mine them, buy, or work for them.
Mining for bitcoins
Before, mining bitcoins was quite profitable. However, today, it’s no more a cost-effective means for average people. To mine bitcoins now, you need to buy centralized bitcoin mining equipment, rent or get a dedicated space for it, and pay the associated costs like electricity, cooling, rental costs, and their associated costs (rental, electricity and cooling costs).
This includes online exchange. There are numerous options now compared to before. You can choose global bitcoin exchanges as well as country specific exchanges. Sometimes, you can buy them from other people like local bitcoin dealers.
Work for bitcoins
6. How Can People Use bitcoins?
Similar to money, you can use this digital currency for spending purpose. Some people prefer to keep them as investments, while others use them to make international money transfers. Since they exist electronically, there are special “bitcoin wallets” to keep them safe. However, there are other wallets including mobile wallet, desktop wallet, web-based/online wallet, paper wallet and hardware wallet.
7. How Should One Send/Spend/Receive Bitcoins?
When you get a bitcoin wallet, this comes with bitcoin addresses, which represent a precise destination more like an email address. However, the addresses of bitcoins are alphanumeric, usually between lengths of 27-34 characters.
Generally, bitcoin service providers have user-friendly interfaces. These allow users to generate bitcoin addresses and receive or send bitcoins. If users want to send bitcoins, they have to ensure positive balance in their wallets, insert the bitcoin address of the receiver, and finally, hit send. For these transactions, there is a small miner’s fee, which is given as an incentive or reward to the bitcoin miners for maintenance of the equipment.
Usually, it takes up to an hour for the transactions to arrive, but the time could vary depending on the amount you wish to transfer. You can spend your bitcoins anywhere that accepts the Bitcoin mode of payment. You may also use a Mastercard/Visa card linked to bitcoins issued by some companies like Coinbase or Wirex.
8. Are there any Disadvantages?
There isn’t anything quite negative about bitcoins; however, here are a few problems that users have experienced.
- The need for advanced digital knowledge is important
- Sometimes, the Bitcoin service providers are hard to trust
- Sometimes transactions are not secure
- Not all countries support it, yet.
Wrapping it up, bitcoins are generally cool, especially because they have an impressive underlying technology behind. The Blockchain is an even cooler part, as you can access recorded transaction data in such a way that no one can tamper with it. As the internet world keeps evolving, let’s see what the future holds for bitcoins!
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