Facts About Bitcoin
Bitcoin is among the most popular digital currencies today. It’s also a new payment system that is entirely digital and independent from financial institutions. Bitcoin offers a more convenient way to pay by eliminating the complexities of credit cards and banks. As opposed to other money transfer systems, like Western Union or MoneyGram, bitcoins are transferred directly from one person to another without any intermediate financial institution.
What is Bitcoin
According to Jordan Sudberg, Bitcoin is a digital asset and payment system created by Satoshi Nakamoto, an anonymous person or group. Cryptocurrencies have become very popular in recent years because they are decentralized and are not controlled or regulated by any single entity. Unlike fiat money like dollars, bitcoins are not printed, and there are not tens of thousands of them in circulation. Bitcoin is a medium of exchange, a unit of measurement of exchange value, and a store of value.
Facts About Bitcoin
The current market capitalization of Bitcoin is around $131 billion. Currently, there are around 17.5 million bitcoin wallets. Bitcoin is the most traded cryptocurrency in the world.
– Financial institutions do not regulate bitcoin. This means that the government doesn’t ensure it against theft or loss. This makes Bitcoin an untrustworthy financial asset.
– Bitcoin is transferred and traded anonymously. This makes it a good choice for money laundering and other illegal activities.
– Bitcoin can be used to buy goods and services online, much like cash or credit cards.
The Bitcoin network is powered by miners who put computing power towards solving complex algorithms to verify transactions and create new bitcoins.
– The cost and time of the transaction depend on the fee one pays the miner. One also has to wait until all the miners solve the problem and verify one transaction before it can be finalized.
How Does Bitcoin Work?
As per Jordan Sudberg, there are complex financial laws behind the scenes that govern the transfer of bitcoins. The process of purchasing and selling bitcoins happens the same way as the cash transfer. One can transfer cash to the seller and receive bitcoins from the receiver as a payment. The only difference is that transactions are handled digitally through the blockchain network. The blockchain is a decentralized digital ledger that records all transactions in the network. All the participants in the network access the same ledger through their computers. They all have a copy of the same ledger that shows who owns what bitcoins. To verify the transaction, the computers in the network use complex algorithms to solve the problem and verify the ownership of the money involved. Once solved, the computer puts a block with the transaction data in the blockchain network.
Advantages of Bitcoin
There are zero intermediaries between the buyer and the seller; no fees are involved in the transaction.
Fast and low transaction costs. The miners determine the transaction costs.
The miners ensure the security of the network. This means that once bitcoin is safe with them.
Privacy. Anyone can send or receive bitcoins without disclosing their names or addresses. This can be used for money laundering.
Easy transfer and trading. One can easily send or receive bitcoins worldwide with just an internet connection. – No third party is responsible for fraud. There is no central authority that governs transactions. Anyone can take any action at any time.
No volatility risk. Unlike other currencies that experience significant price fluctuations, bitcoins are not subject to the same volatility.
Investment opportunity. one can buy bitcoins and hold them as an investment. Every year one can look forward to the increase in their value as their demand increases.
Disadvantages of Bitcoin
– Completely reliant on the internet. If the internet goes down, then so does Bitcoin.
– Completely anonymous. one cannot use his real identity while transacting in it. One can only use an anonymous address to receive bitcoin payments.
– Completely illegal. It is prohibited in many countries. This makes it a risky investment.
Security risk. Thousands of computers hold the ledger. Hackers can easily access it and steal bitcoins.
– No government regulation. There is no central authority that regulates the bitcoin network. This poses a threat to its security.
– No insurance from financial crises. The bitcoin network is entirely reliant on the internet. If the internet gets disrupted, then so does the bitcoin network. This makes bitcoin a high-risk investment during crises when the internet is disrupted.
– No control over spending. The owner of bitcoin does not control how the bitcoins are spent. This makes it a high-risk investment. No interest earned.
One cannot earn interest on bitcoins.
Conclusion
Bitcoin is one of the digital currencies that is entirely decentralized, digital, and secured by thousands of computers. Unlike fiat money like dollars, bitcoins are not printed, and there are not tens of thousands of them in circulation. It’s completely reliant on the internet, anonymous, and illegal. It can be traded or used as a form of payment. The most crucial advantages of bitcoin are that it is fast and cheap. The most significant disadvantages of bitcoin are that it is entirely reliant on the internet, anonymous, and illegal.
