Understanding Bitcoins, Cryptocurrency and Their Advantages
Bitcoin is a kind of digital currency made and stored electronically. Unlike dollars or euros, they are not controlled by any party. They don’t exist in paper, but are instead produced by persons as well as businesses with the use of software that solves mathematical problems.
Bitcoins and Cryptocurrencies
Bitcoins are the first in an emergent category of money referred to as cryptocurrency. The value of conventional currency is based on gold or silver. You know that if you put a dollar in the bank, you will get some gold in return, although is purely theoretical. However, bitcoins are based on mathematics and not on precious metals. Everywhere in the world, people are using software solutions that work around a mathematical formula as a way to produce bitcoins. This mathematical formula available to everyone, which means anyone can actually check it. Even the software is open source, meaning everyone can contribute to ensuring that it continues to do what it is supposed to.
Advantages over Traditional Currencies
Bitcoins can be used to pay for purchases digitally. In such a sense, it’s like traditional currencies, which can also traded through this route. However, there are many advantages of bitcoins, including:
The bitcoin network is not under any central authority. Every bitcoin-mining machine that processes transactions is part and parcel of an entire network, where all the machines work together. Hence, theoretically speaking, no central authority will be able to change or interfere with monetary policy and start a meltdown – or simply decide to seize bitcoins from their owners. And in case a part of the network goes offline for any reason, the money will continue to flow.
Conventional banks can have tons of requirements, sometimes even unnecessary ones, just to open a simple account with them. Opening a merchant account is just another tedious task made complicated by bureaucracy. In contrast, a bitcoin address can be set up in seconds, with zero fees and zero questions at that.
There is anonymity with bitcoin accounts – or sort of. You can have a lot of bitcoin addresses, and not one will be linked to your name, address or any other piece of information that could be traced to you. However, the bitcoin network will keep all the details of each transaction you have made in a giant electronic ledger called the blockchain. The blockchain knows everything. If your set your bitcoin address to public, anyone can see how many bitcoins there are at that address. But they’ll have no idea it’s yours. There are a lot of things you can do to maintain your anonymity on the bitcoin network, like varying the bitcoin addresses you use and avoiding putting too many bitcoins into a single address.
Small International Transfer Fees
Transaction fees are negligible when compared to the charges made by banks for global money transfers.
Speed and Non-Repudiability
With bitcoins, you can send money wherever in the world and it will get there in a matter of minutes, provided the network is online. Finally, it’s non-repudiable. After sending your bitcoins, you can’t recover them, except when the recipient sends them back your way.