What is Bitcoin
Bitcoin (or BTC) has gained great popularity in recent years. Everyone wants to know about this future currency because its value has sky-rocketed since December, 2020.
There’s something special about BTC - people who were once the competitors and critics of bitcoin are now joining in with the enthusiasm toward this new currency.
It’s high time to learn about this new technology and stay connected with the trend. To help our readers understand BTC, we are proud to present this detailed piece on what is bitcoin?
This piece will help you to understand all about bitcoin. We will also outline the pros and cons of BTC, where you can buy BTC, and everything in between. In short, this article is your complete guide to understanding the rising technology we all know as Bitcoin, or BTC.
All About Bitcoin
Welcome to our first section of this long and detailed piece about BTC. This section will cover four things: the definition of BTC, how it was created, who is controlling it, and how bitcoin works.
We have aligned the sub-sections in a way that starts with the basics and builds from there. We recommend following them in the order they’re laid out.
So without further ado, let’s get started!
Definition of Bitcoin
Bitcoin is a type of cryptocurrency - this refers to a digital currency used as a medium of exchange.
Just like fiat money (EUR, USD, SGD), Bitcoin works like a currency. However, it’s digital, and there are no physical bitcoins available (apart from Bitcoin paper).
Unlike fiat currency, however, BTC is created, stored, shared, and traded on a decentralized public ledger. A decentralized public ledger is a record-keeping system where all BTC transactions are recorded, verified, and maintained through computing power and not by a specific governing organization.
No single institution or person controls bitcoin; it’s run by the people who are using it. This is also known as a peer-to-peer network system.
How Bitcoin Was Created
The creation of bitcoin wasn’t an accident, but rather a planned move to disrupt the finance industry. Let’s look at the history of how bitcoin was created.
- On August 18, 2008, a domain org was registered. Today, if you’ll look at the domain info, it’s protected by the WhoisGuard Protected phrase. It means that the identity of the person who registered the domain is still not available to the public.
- For the first time ever, on the 31st of October 2008, the name Satoshi Nakamoto came on the internet. The specific person or group (this is still widely debated) known as Satoshi Nakamoto announced the Cryptography Mailing List at metzdowd.com.
- In the announcement, the anonymous party revealed the whitepaper of the bitcoin - Bitcoin: A Peer-to-Peer Electronic Cash System.
- On the 3rd of January 2009, the first BTC block, “block 0” (also known as the genesis block) was mined. It contained the text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,”
- Jan 8, 2009 marked the release date of the first version of the bitcoin software. It was announced on The Cryptography Mailing List.
- On the 9th of Jan 2009, block 1 of bitcoin was mined.
So, that was the timeline of how BTC came to life. However, people still don’t know the real identity behind the name Satoshi Nakamoto. Although there are many people and groups who claimed to be the identity behind the famous Satoshi Nakamoto, there is no still no substantial evidence as to their true identity.
Who’s the Controlling Party Behind Bitcoin?
Unlike banks and other private financial institutions, BTC isn’t controlled by a single party. However, people who are using bitcoins have full control over their finances.
BTC is independent of a middleman or third party. No one can interfere with bitcoin transactions or impose extra fees and other charges like banks.
Bitcoin is controlled by the people who own it. Users don’t have the authority or power to control the bitcoins of other users.
People who own BTC can transfer or receive bitcoins without the help of a middleman. A BTC wallet helps an individual to send or receive bitcoins without any third-party body.
The best thing about Bitcoin is that your finances are in your hands. You are not being monitored or controlled by a specific group or government. Nor do you need to pass various identity checks to complete a straightforward transaction.
BTC gives you the ultimate control of your money and complete anonymity on the BTC public ledger. Even if you are sending or receiving BTC with someone else, there’s no personal information disclosure between the parties.
Only a software solution along with computing power from all around the world controls the BTC network - and you being the head controller of your money.
Understanding Bitcoin and How It Works
You can think of BTC as a collection of computers (or nodes) that run the code of BTC and store its blockchain.
But what is a blockchain? It’s a collection of blocks that have a record of all the transactions that are being carried out. Each block has a collection of transactions, and when the blocks combine with each other, they are called the blockchain.
All the computers run the same blockchain and control the new blocks that are being updated with recent transactions. As all the computers are on the same page of blockchain, no-one can cheat or alter the blocks.
However, it would require a person or group to control 51% of the computers or nodes to crack the blockchain.
Tokens and Keys
Record of bitcoin tokens is kept using two keys - public and private. Both public and private keys are like long strings of numbers and letters. They are linked to the BTC token using the mathematical encryption that was used to create them.
A public key works like your bank account number. Whereas it’s public to the world, a private key is meant to be kept safe and secure. Don’t confuse the BTC keys with the bitcoin wallet keys - they both are two different things - more on that here.
How Bitcoin Works
Bitcoin works on the principles of peer-to-peer technology for facilitating payments. Unlike banks, BTC uses a decentralized public ledger to process, track, and execute the transaction.
Miners are the people who regulate the blockchain by using computing power. They do so for getting rewards like share in the release of new bitcoins and transaction fees in bitcoins.
When you send or receive some bitcoins, the transaction is listed on the public ledger. Then, a miner verifies it using their computation power. After that, your transaction is completed and listed on the public ledger, and the miner gets their reward in BTC.
We are done with the first section of this article. Now we would touch on the pros and cons of bitcoins.
Pros and Cons of Bitcoin
Just like every other thing in this world, BTC has its pros and cons as well. This section is specifically created to list bitcoin’s pros and cons in a reasonable amount of detail.
In this section, you’ll learn about the six advantages and disadvantages of bitcoin. So let’s get started and see why BTC has both loyal followers and harsh critics.
Pros of Bitcoin
For ages, innovators have been trying to make money as portable as possible. Debit cards, credit cards, top-ups, and mobile banking are prime examples of making money portable.
However, all the advancements to make money portable haven’t actually made a true breakthrough.
After the arrival of BTC, things have changed. As bitcoin is a decentralized digital currency, it allows a person to carry money digitally.
Thanks to bitcoin’s all-digital nature, anyone can receive or send money in a snap - no extra fees or middlemen.
If we look at the current stage of money, there’s no such thing as freedom. Your life’s financial world isn’t in your hands - it’s staked to the state of a bank or an institution.
With bitcoin, you have full freedom. You are no longer tied to a company or institution that’s imposing outrageous verifications, fees, and charges on you.
Bitcoin gives you true freedom and breaks you out of the convoluted world of conventional finance where your money is monitored and controlled by others.
Users of bitcoins are safe and secure. Without their permission, no one can withdraw money from their account or steal personal information.
Unlike other payment methods, bitcoin eliminates the need for trust factor among the traders. BTC replaces it with blockchain so that every owner of bitcoin can enjoy full safety without relying on the decade-old trust-factor methodology in trades.
When receiving or making payments, BTC doesn’t require any party to reveal their personal identity. This makes BTC safe for every user, as personal information is personal for a reason.
Sure, BTC promotes anonymity and privacy - but it does so by being transparent in nature. Nothing is hidden in the world of BTC. There’s a difference between staying anonymous and hidden.
Every bitcoin transaction and its information is always available on the BTC blockchain. Anyone can see the data in real-time along with other advanced details. However, the BTC protocol is encrypted, which makes it manipulation-free.
The bitcoin network is decentralized, so it can’t be controlled by any specific group of people. Lastly, unlike banks, bitcoin is neutral, transparent, and open to all.
If you want to transfer some sum of money to your friend abroad, you’ll have to pay a hefty fee. Regardless of the payment service, the transaction fee and other charges are inevitable.
BTC lets you choose the transaction fee or pay nothing at all. Paying a fee will result in a miner verifying your transaction sooner, whereas paying nothing apart from the money you want to send will cause your transaction to be verified a little later.
Bitcoin doesn’t force you to pay the transaction charges; it’s on you. You can either pay a fee to complete your transaction in seconds - or wait a little longer if you don’t want to pay extra charges.
When it comes to accessibility, there’s no greater contender than bitcoin. Handling bitcoins is simple and straightforward.
You can transfer, receive, and store bitcoins with a few clicks. Moreover, you just need an internet connection and a device to access your bitcoin wallet and carry out your preferred transaction.
There are no restrictions whatsoever in the world of bitcoin. Anyone can buy, sell, store, and trade bitcoins - no third-party or any extra verification required.
Unlike fiat currency, BTC is accessible to every human on the planet with an internet connecction. Lastly, the best thing about BTC’s accessibility is that it’s free of bias.
Disadvantages of Bitcoin
One of the most prominent cons of BTC is its volatile nature. Bitcoin isn’t backed up by any specific body but its users. This makes BTC very unstable.
BTC can go up or down due to various reasons, and those reasons are by no means the same as those of other markets.
One day you might see a 10% increase in the value of BTC, only to see its value crash by 15% the next day.
Nobody can predict the drops and bumps of the BTC value. This volatile nature makes bitcoin a real terror for investors.
BTC value is unpredictable; it can drastically change at any given moment. That’s why people don’t trust it, as it all can be a bubble.
If bitcoin somehow gets past its volatile nature, it can be a game-changer! Recently, legendary investor Bill Miller said that bitcoin would go higher if it gets less risky.
People who own bitcoin are always in fear of losing their private keys. If a person loses their private key or it’s leaked somewhere, there’s no going back.
Losing a key can result in losing your wallet and bitcoin once it for all. You can’t get it back. On the other hand, if your private key gets leaked online, then you can easily lose your BTC in a snap.
Recently, BTC wallets have introduced backup features and other mechanisms to eliminate the fear of losing keys. However, the risk of losing keys is still present.
Unlike fiat currencies and other payment methods, BTC is still a buzzword in many countries and regions. As a matter of fact, in areas where BTC is being used, only a small percentage of people are using it.
As of now, it’s not common to be able to use bitcoin in the same manner as fiat currencies. Bitcoin still doesn’t have nearly the recognition around the world.
For instance, if you would walk to your nearest Nike store to purchase some kicks - you will not be able to pay in bitcoins.
Less recognition around the world has limited the usage of BTC. Lots of people still think that bitcoin is just a form of payment that hackers use for illegal activities.
Bitcoin’s legal status in many regions is still a big question. Not all regions in the world legally support the use of BTC.
In many countries, bitcoin is seen as a legal threat. As there are few bitcoin laws and regulations, the majority of regions still see it as an illegal currency.
There’s no solid regulation behind bitcoin and other cryptocurrencies. This makes BTC way more potent than fiat currencies.
Regulatory bodies and governments fear the anonymity of bitcoin, and are concerned that bitcoin owners can easily purchase illegal goods from shady websites with no way one can track or stop them.
Legalities are still one of the most significant question marks that are stopping BTC from taking over.
Future of the bitcoin relies on the developers of it and the people who are regulating it. New developments are being made every month or so - and this makes BTC an unstable and unreliable form of currency.
BTC is uncontrollable. Governments, banks, etc., are still unable to control it as it continues to be in a developing stage. However, if the government or any agency tries to regulate bitcoin, it would kill the foundation on which BTC stands.
New developments and innovation in the BTC sector are making it stronger - but in the eyes of the finance world, it’s just getting more volatile and unreliable.
No Physical Form
Bitcoin doesn’t exist in a physical form like other currencies. That’s why you can just go to a store and pay in bitcoins. As of right now, it’s not possible.
Bitcoin wallets are simple and easy to use, but everyone on the planet isn’t using them and they can be less convenient than physical money.
So if you want to purchase something in bitcoins, you’ll have to convert it into any other fiat currency or pay in a traditional way. To beat the physical form of money, there’s still time for the BTC enthusiast to reveal a universal system of payment that’s accepted by everyone.
We are done with the prominent advantages and disadvantages of bitcoins. Now, we’ll move onto the next section, where you’ll learn how to get bitcoins.
How Can I Get Bitcoin?
There are two ways you can get bitcoin - purchasing or mining. We’ll cover both mediums separately of getting bitcoin in the following sections.
The simplest way to get your hands on the bitcoins is to buy them. But how can you buy bitcoins? Is there a retailer nearby that sells bitcoins?
Well, actually, bitcoins can be bought from websites (popularly known as exchanges). There are hundreds of trusted exchanges available from where you can buy bitcoins.
However, there are two types of exchanges - decentralized and centralized. Here’s how you can buy bitcoins from a decentralized or centralized exchange.
Buying BTC From Decentralized Exchanges
Decentralized exchanges work on the true principles of blockchain and cryptocurrencies - a P2P system. On a decentralized exchange, you are free to buy bitcoins from the different traders that are selling BTC on that platform.
You aren’t tied to one buying medium. There are hundreds of real traders that are selling bitcoins; you just need to contact them to initiate the trade.
During the trade, you follow the pre-set rules of the trader or negotiate terms with them. After that, you’ll receive the bitcoins you have bought.
Decentralized exchanges aren’t controlled by a group of people. Instead, they run on a software solution just to regulate the ongoing transactions between the traders.
Some of the most popular decentralized exchanges are LocalBitcoins and Paxful.
Buying BTC From Centralized Exchanges
Unlike decentralized exchanges, centralized exchanges operate just like banks and other financial institutions. There is a specific group of people who own or manage the exchange.
When buying bitcoin on centralized exchanges, you are tied to only one seller - the exchange itself. You can’t bargain price or choose traders like in decentralized exchanges. Instead, the exchange sets a specific price, exchange fee, and handles all the logistics. However, centralized exchanges are truly beginner-friendly for new crypto enthusiasts.
The UI is simple to understand. An account can be created in seconds, and buying bitcoin is just a few clicks away. Centralized exchanges also offer great security and insurance to their customers.
Mining bitcoin is another option to get bitcoins, but it’s not preferable or accessible for most people.
Bitcoin mining is like providing computing power to the blockchain network for solving complex mathematical algorithms. It’s necessary to mine bitcoins since the public ledger of the blockchain wouldn’t be maintained without it.
Speaking of getting bitcoins with mining, whenever a bitcoin is released, the miners get a share of it. Apart from that, when miners verify the transactions on the blockchain network, they earn a small percentage as a reward.
So why you shouldn’t mine bitcoins? Because bitcoin mining is getting very expensive and less profitable as time goes on. Long gone are the days where there was no competition in bitcoin mining.
Fast forward to this day; every rich person is investing in mining rigs. With capable and new hardware, bitcoin mining is profitable for increasingly few, and many individuals don’t have access to expensive hardware. For the majority, bitcoin mining is not worthwhile.
So you have bought bitcoins. Of course, you can’t store them in a physical locker or safe; what now? That’s where a crypto wallet comes in - more on that in the next section.
Storing Bitcoins - A Brief Guide to Crypto Wallets
A bitcoin wallet is a hardware/software that’s used to store and trade bitcoins. Note that bitcoins aren’t actually stored in a wallet, but their relevant information is stored on it.
In total, there are four types of bitcoin wallets - desktop, mobile, web, and hardware. Let’s look at each type of wallet.
As suggested by the name, desktop wallets are installed, configured, and used on a computer system.
The owner of the desktop wallet gets to store, receive, send, and trade bitcoins via their PC. Some of the popular desktop wallets are Armory, MultiBit, and Bitcoin Core.
Just like websites, web wallets can be accessed from anywhere and any device. Web wallets are solely based on the internet.
Most of the exchanges from where you buy, sell, and trade bitcoins provide a free web wallet. However, note that web wallets are less secure than desktop wallets.
Mobile wallets work just like a desktop wallet, but they tend to be compatible with iOS and Android devices. Note that most web wallets provide a mobile wallet solution.
Mobile wallets provide features like QR code scanning and touch-to-pay facilities. Most beginners use mobile wallets to store their bitcoins as they are simple and easy to use.
Hardware wallets are the most secure and safe type of wallets. They are like USB devices that store your bitcoins’ information physically rather than on the world wide web.
Also known as cold wallets, hardware wallets aren’t connected to the internet 24/7. For performing transactions or accessing bitcoins, the user has to connect their hardware wallet to the computer.
Purchasing bitcoin, check. Storing bitcoin, check. But what about spending BTC? How is that done? That’s precisely what the next section will help you uncover.
What Can I Buy With Bitcoin?
In 2009, nobody would have thought that bitcoin will be an acceptable payment option anywhere. Now, if you look on the world wide web, many big names in in lots of industries have started to accept BTC.
Although bitcoin spending options are limited, here are some of the things you can buy with bitcoin right now!
Goods from Microsoft Online Store
Tech giant Microsoft added the support of paying in bitcoins back in 2014. However, in June 2018, Microsoft shut the BTC payment gateway for a week due to bitcoin fluctuations.
They started accepting BTC again after a week, and since then, anyone can shop the Microsoft Online Store and pay in bitcoins.
Controllers, games, software, and you name it; whatever is available on the Microsoft Online Store, you can purchase it by paying in bitcoins.
Gifts Cards, Payment Cards and Mobile Top-Ups from Coinsbee.com
At Coinsbee.com, you can purchase gift cards, payment cards, and mobile top-ups in over 165 countries - and of course, via bitcoin.
Apart from bitcoins, Coinsbee supports over 50 cryptocurrencies. On Coinsbee, you can buy eCommerce vouchers for iTunes, Spotify, Netflix, eBay, Amazon, and other major retailers. Moreover, popular gift cards of games and game distributors are also available like Steam, PlayStation, Xbox Live, and League of Legends.
Virtual payment cards like Mastercard, Visa, Paysafecard, Vanilla, etc., are also available. Last and certainly not least, you can purchase mobile top-ups of over 440 providers in 148 countries via bitcoins.
Coinsbee.com is a great hub for purchasing eCommerce vouchers, top-ups, game cards, and virtual payment cards via bitcoins.
VPN Subscription from ExpressVPN
Express VPN, a renowned VPN service provider, accepts bitcoin as a payment method. You can buy your favorite subscription plan from ExpressVPN and pay in bitcoins.
Whoppers from Burger King
Yes! You read it right. Burger King allows its customers to pay in bitcoins. Although we won’t recommend spending your bitcoins on burgers, Burger King will accept them at any given time or day.
However, note that not all locations of Burger King accept bitcoin. Only some locations in the United States of America, Germany, and select others currently accept BTC.
List of Other Things You Can Buy With BTC
- CheapAir for booking flights/hotels.
- PizzaForCoins to order pizza.
- Etsy, an eCommerce site based on handcrafts, antiques, etc.
- Central Texas Gun Works for purchasing guns.
- Just about everything in Japan.
- Subscription to OkCupid online dating platform.
Till now, we have covered everything about bitcoin - but should you really buy bitcoins? Or are they even worth it? It’s time to answer the question you all might have been waiting for too long. So, here’s our opinion about it.
Should You Really Buy Bitcoins?
We all know about the declines and rises of bitcoin; it’s not hidden. However, should you even think about this gamble in the first place?
Well, according to us, yes! The rules of the world we are living in are changing at a rapid pace, and so does how money works.
The concept of bitcoin has dramatically changed how we thought about money. Decentralization is finally taking place, and centralization is now fading away.
Day after day, we are seeing people who were once on the other side of BTC are now seeing bitcoin as valuable.
For instance, PayPal once was against BTC, but recently they have announced buying, selling, and holding crypto via PayPal.
Bitcoin’s Biggest Enemy, JPMorgan, now suddenly appears to be supporting bitcoin. JPMorgan has predicted that BTC will surpass the mark of $143k in 2021.
There are dozens of such stories on the internet, but the gist of it is that BTC is finally showing its true potential. Although some investors are still doubtful about BTC due to its volatility, big companies are now putting their money on it.
Long story short, according to us, you should buy bitcoins and join the currency of the future. Sure, don’t put all your savings on bitcoins but at least start investing and holding a small amount of bitcoin.
Finally, it’s your choice whether you invest in bitcoins or not. We did our part to discuss the future of bitcoin.