Bitcoin is an electronical cryptocurrency. Bitcoin introduces a platform on which you can run currency as an application on a network without any central points of control, just like internet itself. Bitcoin is the first system of money that is not controlled by any entity or organization or government. It’s the transformation of the system to a network based money.
It’s decentralized and backed by no government or banks. It can be transferred from peer to peer network. BTC has only been created 21 mln, and to create more is not possible. To find more about what is Bitcoin, keep reading!
How did is Start?
In 2009, an anonymous programmer(s) under the name of Satoshi Nakamato who believed to be Japanese, established bitcoins as an open source software, left the software to members of BTC community. Gavin Andresen was designated to develop client software for bitcoin network aka Bitcoin Core.
Gavin announced an Australian programmer, Craig Wright, as the real Nakamato but he withdrew the claim. He quit developing for Bitcoin Core in 2016.
So just like bitcoin is decentralized, developers are anonymous as well.
It’s estimated that last BTC will be mined by the year 2140.
What is Bitcoin?
Decentralized and Anonymous
to put it in a simple way decentralized network means there is no way to shut it down because there is no primer owner of the network. Since bitcoin is intranet of money, being shut by just like internet itself is not possible. Even if any participant, in this case any network, goes down the system will proceed.
Unlike the money system we have nowadays which controls addresses, Ids, phone numbers and habits on spending, blockchain system is anonymous and cannot be tracked.
There are no owners, no banks, no institution or organizations to hold transfer actions or follow up of any transactions executed. However, all transactions are restored in blockchain so anonymity is relative but definitely hard to follow or hack unless you’re using a public device to reach your wallet.
Anonymity might lead a secure exchange in between who are in doubt but also, as a conspiracy theory, a slight chance that terrorism, drug dealing and other outlaws may thrive.
Faster then Ever!
To send or receive money from banking systems may take days or even weeks due to amount and/or international transactions. With this new system bitcoin enables it as fast as your network is. So no delays.
What differs BTC from fiat currencies?
Decentralized structure is main characteristic of bitcoin allows system to flow all the time. In traditional way, money flow depends on the systems working. Decentralized network is built on people communicating and even if some part of the system (people, corporations or even the machines) go offline, the transactions will still take place. It cannot be seized, frozen or censored. Transactions can’t be intercepted or stopped.
Very Easy to Have an Account, and Free!
If you want to have a bank account you need to address some necessary in traditional money and banking systems such as to be over 18 years old in some countries to have an independent account or to be free of debts to get a credit card which basically is plastic money. In bitcoin case you don’t even have to be a human to have an account since it’s an application developing system that produces bitcoin so you can even be a robot or a machine.
Never Turn Back!
Bitcoin transactions are delivered or sent and then that’s it. If you wish to undo the transaction it’s not possible. This may prevent fraud in many cases. In traditional money/banking systems all you need to do is make a call and cancel the last action where for the bitcoins you need to get them back from the recipient.
Traditional banking systems are open to be hacked since there is one control mechanism. In order to hack bitcoins, you need to hack millions of people which seems quite impossible since no bitcoins are stored in one umbrella unlike banks.
Bitcoins are codes running through network systems, so they can’t be destroyed. Unlike paper money, bitcoin is eternal.
Who controls Bitcoin?
No one except you.
System developer Gavin Andresen was keen on further decentralization after Nakamoto and wished it would work even without the developers themselves. In contrast to banking systems where all your transactions are traced, you are the only one responsible. Every single transaction is stored in a public ledger called blockchain.
Bitcoin : Pros and Cons
I think we know something about what is Bitcoin. So, lets look Pros and Cons of BTC.
PROS of Bitcoin
You can buy anything from deep-web markets that only accept bitcoins easily than you can from traditional markets. There also will be no currency rate issues due to different geological platforms.
Bitcoin is completely digital so no problems with carrying it. It can be stored on a flash drive or online. To send/receive bitcoins with just a click of an online wallet or scanning a QR-code makes freedom in transaction possible.
Commissions can be used as incentives to miners for them to make sure the transaction will be included in the new block being generated. Some miners get more money via this rather than mining.
So, bitcoin market allows participants to choose to pay fee which allows quicker transactions or to wait for the action to be accomplished if you do not have a time issue.
With bitcoins there is no need to comply with PCI (Payment Card Industry) rules. For big companies these regulations can be good but for regular customers it’s easier to branch out into new markets where credit cards are not accepted.
Bitcoin users are responsible from their transactions. They control all transactions. No one without their knowledge can steal or send bitcoins to some other accounts.
No Double Spends:
In the digital world, using the same money twice make counterfeiting easier. To prevent this, bitcoin uses blockchain technology and some other consensus mechanisms are also built into all BTC algorithms.
You have a public key account number and/or address consists of from 27 to 34 alphanumeric characters to reach your account. And also a private key and password to reach your bitcoin wallet. If you lose the passwords then you cannot reach your account. Most wallets have a backup system but you need to enable it before being able to use them.
Bitcoins value is unpredictable, it changes rapidly and drastically. However whenever market has been down later on it become straight again but due to this volatility to control the damage you might get may not be so easy.
Recognition of Bitcoin:
Sustainability of the market with bitcoin depends on how much recognized it is. There are numbers of countries recognize BTC though they do not have any regulations on it. It still is not possible to abandon all other currencies and start using bitcoins.
Despite the fact that considerable number of countries recognizes bitcoins it still is a question whether this market is an easy opening door to illegal consumptions. To strengthen the argument; closing web black market Silk Road, decreased value of Bitcoin significantly.
Never Ending Improvements:
For the last 9 years bitcoin and blockchain have been developed; no banks or countries are able to control it. The more people interested in, probably an urge to control or regulations governments will try to conduct. A government controlled bitcoin would be entirely different sort of currency we’re trying to understand nowadays.
How does Bitcoin work?
Every transaction processed is stored in a public ledger called blockchain. Digital records of transactions are combined into blocks and stored in blockchain. If an attempt to change a single letter or a number in a block of transactions, the following blocks will also be affected. So it’s easy to spot any fraud attempt and be corrected by anyone.
A user only sees transaction results and amount of bitcoins he or she has on their wallet. This wallet is used to track each transaction which is protected by digital signatures corresponding to the addresses sent.
How to get Bitcoin?
To have some bitcoins first you need to get a wallet. It can be an online wallet and a software wallet on hard drive of your computer. Both are equally unsafe since a hacker attack is possible. Mobile wallets are as well have the capacity to to carry entire blockchain. Hardware wallets and paper wallets with QR-codes which do not have digital fingerprint also makes your wallet immune to cyber attacks and hardware failures.
The most profitable way to get bitcoins is of course mining. But nowadays unfortunately this is not the case. The more CPU power you have and the more you mind the better your odds are getting of these BTCs for free. You need to keep in mind the expense of the electricity and associated hardware you have to buy. In short, if you want to get bitcoins by mining you need to make a good cost analysis to make a considerable profit.
The easiest way to put bitcoins into the wallet is to buy them from other people via marketplaces. You can pay by cash, credit and even with other cryptocurrencies.
What about Taxes?
As mentioned above there are no legal laws on taxing bitcoins. However some tax authorities agreed and proposed some regulations. They vary from country to country.
In U.S Internal Revenue Service treats bitcoins and alt currencies as a property. So if any product or service is sold or bought via bitcoin it has to be included in the annual tax returns. Miners are also included in the regulation if and only the mining is successful and bitcoins are produced.
In Europe, bitcoin is still a currency but a foreign one. It is exempt from VAT.
In Japan, cryptocurrencies are officially recognized as a payment method but still sale of bitcoins is exempt from consumption tax.
What is BTC whale?
Like the whales are the largest mammals on earth, BTC whales are the largest players in BTC market. They are not individuals but mostly institutions like Hedge funds, Bitcoin Investment Funds, Bitcoins reserve and Bitcoin Investment Trust etc.
These institutions basically play with hundreds of thousands of bitcoins. Different than regular traders, they arrange special agreements to move that big amounts.
To be a top one percent whale 15 BTC is needed on your name.
What to buy with BTC?
You can buy anything online that accepts BTC such as Air Lithuania, AirBaltic, Microsoft, Dell, theatre tickets in UK. There are also marketplaces where you can buy products or services accordingly.
Some hotels and real estate agencies also accept BTCs. You can join dating sites or buy some beverage as well.
Long story short, the more prevalent BTC will be, the more products are available via BTC payment.
Last words about Bitcoin,
BTC story fulfills all characteristics of a bubble including mass interest, stories on being rich by it, sharp increase or decreases in the price of an asset. So it basically is a bubble. However, it recovers and comes back stronger. No one knows the future of bitcoin still somehow it has been 9 years it’s on the market and still in interest.