All About Bitcoin – The Basics!
Bitcoin is an unconventional form of currency that is electronically created and held. No one controls this currency. Unlike dollars, euros or any other currency you use, Bitcoins are not printed. They are produced by people and businesses running computers world over using mathematical problem-solving software. Bitcoin is the first example of a money category referred to as cryptocurrency.
Why It Is Different From Your Normal Currency
You can use bitcoin to purchase electronically. For this reason, it is just like the traditional currencies which are also digitally traded.
The most notable difference that sets bitcoin apart is the fact that it is decentralized. This means that the bitcoin networks are not controlled by any institution. The fact that large banks will not control the money gives a lot of people a reason to use bitcoins.
Who Made Bitcoin?
Satoshi Nakamoto, a pro software developer proposed bitcoin. The aim was to create an electronic method of payment that works through mathematical proof. The main idea was to have a currency that cannot be controlled by a central authority but still be electronically transferred instantly with minimal translation cost. This is how bitcoin was born.
So, Who Prints Bitcoin?
As mentioned, Bitcoin is different from other currencies because it is not printed. It is not printed in shadows by banks that make their own rules and remain unaccountable to the population. In such a case, the involved bank can go out of their way to print more money for purposes of covering debts and this ends up devaluing the currency.
On the other hand, bitcoin is digitally created by a community that can be joined by just about anyone. The coins are mined through computer power and a distributed network. The network also includes transactions that are made using virtual currency which makes bitcoin its own network of payment.
Can People Churn Out Unlimited Bitcoins
Yes, this is possible. The rules that make bitcoin work are referred as the bitcoin protocol and state that only 21 million bitcoins can ever exist or be created by the miners. Though this is the case, these coins can be divided into smaller portions that are referred to as the ‘Satoshi’ – named after the bitcoin founder. These small parts are 100 millionth of a bitcoin.
What Is Bitcoin Based Upon?
Traditional currency is backed by silver and gold. Bitcoin is not based on gold, its basis is mathematics. People around the world have been solve a mathematical formula that will produce bitcoins. More complex mathematical formula earns more bitcoins. The mathematical formula can be checked by anyone since it has been freely availed. The software used in bitcoin is open source this means that you, or anyone else can check it to ensure that it is working like it is supposed to.
Characteristics Of Bitcoin
There are a number of features that set bitcoin apart from the traditional currencies that are government-backed.
- It Is Decentralized
One of the most notable characteristics of bitcoin is the fact that it is not centrally controlled by a certain authority. There is a large network that is made up of all the machines that are used in mining bitcoin and processing transactions. This means that a single authority cannot cause a meltdown through monetary policies or taking away everyone’s money like what happened in Cyprus in 2013. A part of the network going off does not interfere with the flow of the currency.
- Easy Set Up
There are many hoops that you have to jump around just to open a bank account. If you want to setup a merchant account, it is another uphill task. With bitcoin, you will setup an address within seconds and there will be no fees and no questions asked.
- Bitcoin Is Partly Anonymous
The transactions will be stored in a public ledger referred to as a blockchain. This means people can link your identity to a certain transaction. You can, however, achieve better privacy with the use of tools offered by some companies. It is important to follow tax laws in your country while using bitcoins but you can avoid them by using newer bitcoin wallets which use new addresses people send you bitcoins. The blockchain is what makes the bitcoin currency transparent. People can know how many bitcoins are at an address through the blockchain but will not know who the wallets belong to.
- Your Bitcoin Wallets Are Secure
You get different bitcoin wallets but the most important element is the person in control of private keys needed to be in a position to spend the currency. Some wallets will act like banks because they will be holding the private keys on behalf of users. Using these services means that the security of the bitcoin will depend on whoever holds the private keys.
If you are in charge of your keywords, it simply means that you are the only person who can access your coins in the world. While this is secure, it also means that if you forget your password or lose private keys access, no one can help you. The best approach is to divide the coins in different wallets because putting your eggs in one basket is dangerous.
- It is Fast
The bitcoin networks are fast and you can send money anywhere with the arrival being in a few minutes. It is important to note that when you send bitcoins, you will not get them back unless the recipient sends them back to you.
You have a number of ways to buy bitcoins but the best way to do it is through trusted exchanges. Since there is some inefficiency in the conventional systems of banking, there will always be some differences in prices. When the difference is big, there are some traders who will buy low on some exchanges and sell high on another. Welcome to Bitcoin Trading! This shows that you should do your research before you trust a certain exchange and more research to understand what bitcoin is all about.
This post covers the basics to Bitcoin. If you have any questions and have any feedback on what else you would like to learn about bitcoins, please leave a comment below. We would love to hear how this article help you transition to cryptocurrency.
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