What is Bitcoin and why is it so popular?
By: Nicole Johnson
Bitcoin in simple terms is a digital currency built on a blockchain utilizing cryptography for security. It utilizes a network with a number of useful features. This will be explained below.
To begin Bitcoin is:
1. A system of digital currency.
2. A distributed ledger (a secured list of transactions)
3. Decentralized (anyone can participate).
4. A means of reaching consensus (agreement).
5. Highly secure due to how .the check systems on the network are carried out.
These features provides a system of exchanging value (currency) which puts the people in full control rather than a central bank.
To store your bitcoins you utilize a digital or hard wallet and are issued private keys. These private keys provide you the control and security of your bitcoins.
How are Bitcoins produced and are there limited quantities?
Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto and released as open-sourced software in 2009. There was only 21,000,000 put into circulation and there will be no more ever made. this is one reason why its value keeps increasing—supply and demand.
The way that bitcoins are exchanged involves solving very complex mathematical problems.
This is called mining and protects transactions on the network from errors, falsification, and double spending. Millions of computers from around the world (decentralized) compete to solve these complex problems and in return they enter a kind of competition where the winner gets a certain number of bitcoins for their efforts. As the network of bitcoin miners grows this computing power grows and makes it harder for bitcoin to be attacked and hacked making it more and more secure. This results in glitches being addressed from around the world which keeps it being improved. The moment someone alerts the community to a potential problem, the issue is immediately addressed.
Why is Bitcoin Better than Regular Money?
Think about it. Regular money has become digital and is vulnerable to attacks. True, many people carry cash, but that is a temporary medium of exchange. The paper only has value because of the value attached to it.
Have you seen anybody carrying around silver and gold for exchange nowadays? There is no longer anything backing fiat money anymore. Fiat money simply has value because people believe in it and the system that backs it.
In the end, you are trusting your banks “digital storehouse”. This digital money that is kept on banks servers is not built on the blockchain. Blockchain is revolutionary and is changing industries as we know it. We constantly see in the news how traditional financial institutions are hacked.
Unlike regular forms of “fiat” money there is no central authority in control of bitcoin. This means that there is no central government or bank that can block transactions or freeze your money.
Bitcoin is far cheaper to make transactions compared to other means of transferring money and can be done worldwide at a fraction of the time.
As stated earlier there will only be 21,000,000 bitcoins ever in circulation. Unlike governments that can just print more money and causes it to devalue, bitcoin is limited. That’s why the overall price keeps increasing. True, it may go down due to negative news, government regulation and the like, but in the end, it keeps climbing. In December of 2010 bitcoin was almost worth $1.00. In December of 2017 bitcoin was almost worth a staggering $20,000! The end result is a currency that is better protected against inflation.
Another factor causing the value to increase are the costs required in mining bitcoins. In the same way that certain minerals are expensive due to the costs of extraction, bitcoins become harder to mine, so the valuation of them goes up. Supply and demand.
Another source of value is the ability to use the security of the network to carry out other “accessory” operations. There are a number of projects working on using the bitcoin ledger to secure other information. This provides a utility value to the network.
In the end, more and more people believe in Bitcoin and the Bitcoin network (with its ability to securely transmit value). The result is increased value.
Is Bitcoin is Perfect Then?
No human created system can ever be perfect. Bitcoin is quite brilliant but not perfect.
As with any technology, there are risks because Technology can never change human nature or how people behave. It just gives people more options.
Bitcoin does not stop people from being irresponsible or acting immorally. Thus, it can be misused and exploited. Some use it for money laundering and other illegal practices. However, it must be noted that this is a risk that has existed with virtually all technologies since the dawn of humanity.
Secondly, if you don’t protect your private keys (which are like your bank details and passwords) you could lose all your bitcoins. It is your responsibility to be smart and keep your sensitive information secure. You are your own bank and its security.
Is Bitcoin Hack Proof?
Nothing is completely hack proof.
There is always the possibility there could be defects in the coding that could allow other types of exploits. Fortunately, Bitcoin is an open source software and anyone can check the code.
There are areas of the bitcoin protocol that can potentially be exploited – just like any other type of technology. It must be remembered, nothing is completely hack proof, including traditional fiat money in digital code.
Bitcoin is considered very secure.
Disclaimer: It also must be remembered that Bitcoin is relatively new, thus highly volatile. Governments are in the process of regulating it and you must be aware that presently it is considered high risk. Invest only what you can potentially lose.
How can I get Bitcoin?
The most obvious way to do it is to mine it, however, this is now beyond the means of most people due to the expensive hardware (and cheap electricity) required.
You can all purchase bitcoin and buying options will vary depending on your location.
For further information go to our section Where to buy Bitcoin.
