Reading any financial or technology news today has you likely to encounter Bitcoin, with terms like cryptocurrency, blockchain, wallets, and mining being thrown around. It can seem like a foreign language, but the truth is that the market isn’t as hard to understand as you might think.
Bitcoin is the most popular and valuable cryptocurrency on the market. Cryptocurrencies don’t use physical money, they are digital entries that are created and managed electronically. Blockchains are ledgers attached to every individual Bitcoin. Rather than having a master ledger, like a bank, every “coin” carries its own record of transactions. It’s entirely decentralised, so no-one has true control over it.
Because there’s central system governing its use, Bitcoin can be used for entirely anonymous transactions online. Without ties to a central bank, country, or regulation, not only is it useful for purchasing overseas, but there are virtually no fees attached, often making it cheaper.
Nowadays, Bitcoins can be bought in online exchanges, but they can also be mined. This is the process of using a computer to solve a complex computation puzzle, which produces new Bitcoins. Apps known as wallets are then used to store and trade them.
There are quite a few reasons Bitcoin has become so popular. Thanks to the features named above, it has developed a few specific advantages over traditional currencies:
Accessibility: Though it can be hard to get your head wrapped around the terminology, creating or installing a wallet and buying some Bitcoins isn’t hard at all. Bitcoins are available in any country, with no arbitrary fees or need to set up an account with lots of personal information attached.
Speed: Bitcoin transactions involve little more than a data exchange, with no regulation around them, meaning it can minutes, if not seconds, to complete a transaction.
Decentralisation: Blockchain is a revolution in currency security and convenience. No-one can hack into your bank and steal your Bitcoins. Nor do you have to make a lengthy application and petition an authority to get a wallet. There’s no-one in control, so you are free to buy, sell, and mine as you want.
Anonymity: Since you don’t have to sign up with a bank or put a stamp on your wallet or Bitcoins, you can make transactions completely anonymously, so long as the other party doesn’t require you to have an account. Blockchain ledgers carry their own Bitcoin ID, so there’s no chance of fraud like someone else trying to spend your own Bitcoins, either.
Secure: All Bitcoins carry a ledger that constantly has them checking and validating one another. No Bitcoin can ever be moved out of its place without your consent and the use of a private key. Given how strong the cryptography is on the system, there has only ever been one hack due to a bug that was removed eight years ago, and no breaches since.
Growing demand: The turn of the year 2018 saw a huge surge in demand for Bitcoins, dramatically increasing their value. It has dipped a little since but is still much higher than it was before that increase. With bodies like the Japanese government officially allowing the use of Bitcoin and other technocratic countries following suit, it could be due another surge in demand and, thus, value.
Both as an investment tool and a currency, the increasing popularity of Bitcoin is expected to grow, which is good for a number of reasons. Without arbitrary bodies governing the use of your money, buying and selling on the internet can get a lot safer and convenient, helping you make quick transactions while protecting your personal information. There are a growing number of Bitcoin scams, as well as new cryptocurrencies that have nowhere near the value or potential. While care is needed, that doesn’t mean that Bitcoin is not an opportunity worth investigating.