The Basics of Bitcoin
Read on to discover the basics of bitcoin with this Bitcoin Primer.
Not issued by any country. No bank holds it. Not institution backed. No coins (or bills) even denote it.
Bitcoin is cryptocurrency. It is entirely virtual. Transacted almost exclusively online, it exists only in digital form. The market wholly determines the value of the bitcoin.
Since its inception in 2009, Bitcoin has been a curiosity for many. And a mystery to many more. After all, can a currency that exists purely online even be real?
The Answer Is Yes. Yes, It Can.
In fact, its value is very real. It recently surged to well above $2,000 USD – more than doubling its value in one year. One financial analyst at Saxo Bank predicts its value could hit $100,000 USD in just ten years. At the same time, its value can fluctuate wildly. In May 2017, for example, it took a dive of more than $500 in just one day.
So how exactly does Bitcoin work?
Bitcoin is obtained either by:
- selling goods and services,
- purchasing it via Bitcoin exchange or private seller, or
- ‘mining’ it.
Because the currency is not centralized, it relies on computers provided by Bitcoin miners to perform and validate its transactions. It is the Bitcoin miners who provide the computational machinery. Compensation for bitcoin mining comes in the actual currency, from transaction fees and newly minted Bitcoin currency.
How Do I Hold Bitcoin?
You keep bitcoin in individual online “wallets”. These wallets enable each respective owner to receive, store, and send bitcoins to other wallet owners. Each wallet has an address to which its owner has a private key. And while each wallet is private, every Bitcoin transaction is logged in a blockchain. A blockchain is a public record of every Bitcoin transaction.
The Advantage?
Affordability. Convenience. And security. Compared to banks and credit cards, transaction fees are almost nonexistent. Buyers and sellers can conduct transactions instantly across international jurisdictions. And there’s no risk a third party seizing the funds.
So Who Is Using Bitcoin?
It’s actually hard to say, because much of the Bitcoin community remains anonymous and widespread. One study suggests that the average user is 33 years old and lives in the United States. Even so, while there is a committed group of core users, Bitcoin’s popularity continues to grow. Especially among more volatile economies such as Venezuela, Nigeria, and even South Korea.
Global Economy
But, is Bitcoin having a significant effect on the economy? After all, it’s available in every part in the world. Giving everyone the potential to buy and sell goods and services on a global scale. Bitcoin advocates argue that because it’s secure, can’t be counterfeited, and can scale according to demand, it could soon become the de facto standard for international trade.