If you want to know what are Bitcoins, how you can get it and how it can help you, without floundering into technical details, this guide is for you. It will explain how the system works, how you can use it for your profit, which scams to avoid. It will also direct you to resources that will help you store and use your first pieces of digital currency. If you are looking for something even more in detail please check out our blockchain courses on bitcoin.
What is Bitcoin?
Even though we have claimed Bitcoin to be a fairly new form of digital currency, it has been in operations since 2009. Invented originally by someone under the alias of Satoshi Nakamoto, it is still unclear who is the exact founder of the coin. Various news outlets including The New York Times, Newsweek, Forbes, and Gizmodo have made different headlines claiming distinct people as being the founder of the coin. Now that we understand that the origins of the creator of Bitcoin are pretty bleak, let’s learn what exactly does a Bitcoin do and how is it different from other forms of digital online currency exchange services?
To begin with, if you have ever made use of digital online currency exchange, you must be aware of the transaction fees charged by these middlemen.
One of the distinctive features of digital currency exchange services is their transaction fees and other charges. The most important aspect of Bitcoins that differentiates it from other digital currency exchange services is that it does not charge any kind of transaction fees.
Bitcoin is an open-source Peer-to-Peer payment service that has done away with any kinds of middlemen transaction fees. You can make use of this crypto-currency to buy anything online and many merchants are beginning to accept this new form of digital currency. Many networks like Purse to buy Amazon products, WordPress eBay, Zappos, Microsoft, Dell, Shopify and more already accept Bitcoins as a form of payment.
Another most important factor of the Bitcoin-system is that using this crypto-currency allows payment allows users to handle their payments completely anonymously.
While Bitcoin seems an amazing form of digital currency with its startling strengths, how does it exactly work? Bitcoin is a form of decentralized form of currency, as deemed by the U.S. Treasury. Bitcoin does not base upon a central authority or a bank and instead is carried out by the network of its entire community (Decentralized network).
Considering Bitcoins as a form of digital currency, these could be bought at different Bitcoins currency exchange networks. These networks allow users to buy and sell Bitcoins from their chosen form of currency including USD, Euros, INR and more.
These newly bought Bitcoins are now stored in your digital wallet, which could be accessed over mobile or desktop devices. You can also send or receive Bitcoins from other users with a simple tap of the button. The Bitcoins could also be used to make purchases online at outlets which currently accept them. This is a simple explanation of how the Bitcoin works.
Now, how exactly are these Bitcoins generated and managed and issued if there is no involvement of a central agency or banks? For the purpose of understanding how the Bitcoin network is managed, we now have to introduce a new set of people known as ‘Miners’ on the network. Miners are individual groups of people who lend their computing power and capacity to the community and to keep the integrity of transactions on the network in check. These Miners verify the transactions on the network and are rewarded with the newly generated Bitcoins for their efforts.
A transparent publicly maintained ledger is then updated with transactions on the Bitcoin network. Often known as a form of ‘cryptocurrency‘, Bitcoin is the largest form of digital currency of its kind.
It is fair to say that Bitcoin operates off the physical grid and doesn’t involve any kind of central agency or the banks, is it still legal? The answer would be, it depends on user location.
The legality of Bitcoin depends primarily on your location of interest and the purpose accordingly. Given that Bitcoin is a form of decentralized digital currency, it is illegal to use Bitcoins in many countries and some governments allow its use. The United States, for example, have now declared it as a commodity. Indian Deputy Governor of the Reserve Bank of India has stated that they have no plans to legalize Bitcoins in India. Bangladesh government has stated that “anybody caught using the virtual currency could be jailed under the country’s strict anti-money laundering laws”.Some other countries are particularly neutral about the usage of Bitcoins. Japan has started accepting Bitcoin as a payment option.
So, it makes sense that you double-check your local government laws pertaining to Bitcoins before making use of them.
The best thing about Bitcoins is that it is decentralized, which means that you can settle international deals without messing around with exchange rates and extra charges. Bitcoins are free from government interference and manipulation, so there’s no Federal Reserve System to hike interest rates. It is also transparent, so you know what is happening with your money. You can start accepting bitcoins instantly, without investing money and energy into details, such as setting up a merchant account or buying credit card processing hardware. Bitcoins cannot be forged, nor can your client demand a refund.
It’s small wonder that users call Bitcoin “Money 2.0” or that Bill Gates called it “a techno tour de force.”
Now that you have a good understanding of what Bitcoin exactly is and how it works, how are people around the world making use of Bitcoins?
Well, one of the primary ways people are making use of Bitcoins is by exchanging them across different users. People are making use of Bitcoins to share and exchange money between friends, to avoid the transaction and credit card fees.
Some other Bitcoins users are making use of the currency exchange network to make purchases online, including to buy things like Pizzas, clothing, games, electronics, accessories and much more.
While there are individuals on one side making the most of the Bitcoins currency exchange system, there are also small businesses using the service. Again, for the same reasons of waived transaction fees and instant transfers, many small businesses are now making use of the Bitcoin currency exchange services.
Expedia has also recently begun accepting Bitcoins as a form of payment for hotel and travel bookings. Check out Bitcoin group on Reddit