Bitcoin: Everything You Need to Know
Although it took until 2009 for a mysterious person calling themselves Satoshi Nakamoto to introduce the idea of Bitcoin, the concept of crypto-currency actually stems from a 1998 publication by a man named Wei Dai.
What began as an idea for a way to create an economy outside the constraints of the federal government quickly gained momentum and has now become a multi-million dollar a year global financial system.
What Is Bitcoin?
Every person who either earns or uses Bitcoin has control over their part of the entire network. There are no middlemen or owners at all. Each individual holds a personal Bitcoin wallet that accepts deposits and makes payments from a variety of online places.
According to the latest numbers from Bitcoin.org, the total value of all Bitcoins circulating is approximately US $1.5 billion. Many individuals and businesses, to include everything from online retail giant Overstock to physical shops like REEDs Jewelers, now accept this crypto-currency.
The easiest way to acquire Bitcoin is to have someone else give it to you either as a gift or through a sales transaction. The currency is created through a process called mining, but it requires specific hardware and insider knowledge these days. Exchanging real-world currencies for virtual currencies allows you to essentially buy Bitcoin as well.
All transactions are handled both privately, with extensive security encryption in place, and publicly for everyone else on the network. This system of checks and balances allows users to maintain some small level of anonymity while making sure no one tries to game the system.
Since there is a cap of 21 million bitcoins in circulation ever, it is important to keep track of where they are and where they’re going.
Is Bitcoin a Good Choice for You?
It is important for everyone to consider the pros and cons before jumping in. Even though everything is handled virtually, it is still your money and financial stability at risk.
Benefits of Bitcoin
There are clear benefits to using Bitcoins, and these benefits explain the Bitcoin’s rise in popularity.
- Bitcoin, like all crypto-currencies, are available every hour of every day throughout the year. Transactions are quick, secure, and not reliant on banks or other institutions’ office hours.
- The ever-increasing list of companies and individuals who accept this type of payment for products and services includes both online and real-world options.
- Transparent fees are the norm, and they are usually lower than you would find if you are trading other currencies such as US dollars or the Euro.
- If you are involved in selling a product or service, accepting Bitcoins has benefits as well. Clients or customers cannot reverse payments. You would need to issue a direct refund if they dispute the transaction. Also, the lack of personal information transmitted with the payment means you need to worry less about the security of company databases.
Disadvantages of Bitcoin
Although the popularity of using virtual currency improves, it still cannot compete with the power and convenience of regular money.
- Using a credit card affords more buyer protection because you can file claims and charge-backs. Cash transactions blow every other type of payment acceptance out of the water.
- Everything seems to be digital these days, but having your currency stored only on the web or in the cloud creates vulnerability. There is no vault of gold bars backing up Bitcoin. You can’t carry them around in your pocket. If someone hacks into or crashes your online wallet or virtual coin storage, you may lose everything. Lost Bitcoin cannot be retrieved and may end up out of circulation entirely.
- Compared to actual currencies around the world, Bitcoin value experiences much more volatility based on the current market trends. This is due primarily to the comparably small number of services and businesses who use it. One small change can create large ripples in the network.
- The possibility always exists that international governments will change the rules about crypto-currencies and decimate their value. According to CNN’s latest map, only Iceland and Vietnam have made virtual money against the law. Many other countries, including Russia and China, are in constant dispute about their use.
- Because of the assumed privacy of transactions, BitCoin is unfortunately used for illegal activities as well.
Bitcoin & Online Trading
Although people can get Bitcoin and use it to purchase goods or services, others with a more entrepreneurial spirit can learn how to trade this currency and make their virtual wallet grow. This process involves some risk and, due to the ever-changing value, only users with a keen grasp of trading practices and an excellent system behind them should try.
The earning method mimics commodities trading or any type of wholesale-retail transaction: buy low, sell high. In simple terms, you want to purchase Bitcoin at an affordable price and wait until each one is worth more before you sell them again. The difference is profit.
While the process may seem simple, anyone who gets involved needs sufficient knowledge about the marketplace, where to buy and sell from, associated fees, and best practices. Currency trading is not something to jump into blindly. However, if done right and watched closely, it can be quite lucrative.
From its humble beginnings as nothing but an idea in a newsletter, crypto-currencies and Bitcoin, in particular, have grown to virtual powerhouses of independent finance.
As the network grows and more people and companies adopt its usage, prices should stabilize and give traders a greater opportunity for earning than ever before. Open a Bitcoin wallet and you can begin to fill it with virtual currency that can grow without government regulation or interference.