What is Bitcoin?
Do you have an interest in currencies? Well, Bitcoin might do well to help you explore more about currencies and the potential benefits that it can bring in your life. Given that, let us learn more information about Bitcoin.
BITCOIN refers to the digital currency, and it was created in January 2009. The ideas here rooted in the whitepaper of a pseudonymous and mysterious developer named Satoshi Nakamoto. Unfortunately, the true identity of the developer is not yet verified.
Bitcoin offers transactions that have lower fees compared to the traditional mechanisms of online payment, and also, it is being operated not by government-issued currencies but by decentralized authorities.
Here, through the verification of a massive computer power amount and Bitcoin transactions, the cloud only keeps balances that are kept on the public ledger and not physical Bitcoins. The Bitcoin is not also backed or issued by governments or banks, nor the individual Bitcoins as a commodity. Although it is not a legal tender, Bitcoin still manages to have a high chart in terms of popularity, and it successfully triggered the launch of Altcoins- the hundred virtual collective currencies.
Understanding Bitcoin
Bitcoin is known as a type of cryptocurrency. The tokens of Bitcoin balances are being kept through private and public keys, which are identified as the long letter and number strings linked to a mathematical encryption algorithm used for the creation of it. The public key is commonly compared to a bank account number, and it is used as the address which can be published and make way to send bitcoins. On the other hand, the private key is commonly compared to an ATM pin, and it is meant to be protected since it is used only by authorized transmissions. There must be no confusion between the Bitcoin keys and the Bitcoin wallet. This wallet is either a digital or physical device that allows Bitcoin trading facilities and allows a track of the users’ ownership of coins. Also, the term wallet comes in a misleading approach as Bitcoin’s nature does not mean to store in a wallet but rather on a blockchain only.
Style Notes:
According to Bitcoin’s Official Foundation, when the term Bitcoin is capitalized, it refers to the concept or entity. When it is written in lowercase, it refers to currency quantity or the unit.
How Does It Work?
This is probably the top question of the mass, especially Bitcoin, which is already making its legacy nowadays in terms of digital currency and foreign exchange as well.
Well, Bitcoin has been the very first digital currency that uses peer-to-peer technology in facilitating instant payments. Those independent companies and individuals who participate in the network of Bitcoin and own a computer power that can govern are the so-called miners. These miners are then motivated to do well within the platform of Bitcoin by the rewards and paid transaction fees. They are also regarded as the decentralized authority, who is responsible as the enforcers of reliability and credibility of the network.
Fixed and new Bitcoins are provided to the miners; however, some rates periodically decline, such that there is a total of 21 million supply of Bitcoin. Presently, there is still a total of 3 million Bitcoins that must be mined and used. In this way, there can be an effective operation of Bitcoin, which is different from the fiat currency. In banking systems that are centralized, the release of currency rates and matches the growth of goods with an attempt to maintain the stability of price. On the other hand, the decentralized banking systems such as bitcoin release the rate either depending on the algorithm or ahead of time.
Bitcoin Mining
This is the process wherein the bitcoins are being released to the circulation. Here, there is a need to compute difficult puzzles to discover or unlock a new block. The block will be added then to the blockchain. To get some blockchain contribution, the mining verifies and adds records of transactions across the network. Also, to add blocks in it, the miners will receive rewards in a few bitcoin forms, which are halved in every 210,000 blocks. In 2009, the reward of the block was 50 bitcoins and is 12.5 currently. As bitcoins are added and created continuously, there will be an increase in the difficulty of computing the involved power. The difficulty of mining started at 1.0 when Bitcoin successfully debuted way back in 2009. Then, following it was 1.18 during the last quarter of the same year. Now, as of 2019, there is an over 12 trillion mining difficulty. If back then, an ordinary desktop can already do computer sufficed progress of mining, it is all-new now. Today, to do combat for mining progress, there is a need for complex and expensive hardware such as ASIC or the Application-Specific Integrated Circuits and other advanced units like GPU or Graphic Processing Unit. The elaborated processors or mining are called as mining rigs.
Working for Bitcoins
A job in bitcoins can pay those self-employed individuals at a good rate. Here are some of the job or website boards that are digital currency dedicated.
- Coinality
This board features jobs that can be full-time or part-time, freelance, and offers bitcoins as payment. Some similar boards with similar processes to Coinality are Litecoin and Dogecoin.
- Cryptogrind
Prospective employers and job seekers are being brought to this website.
- BitGigs
- Jobs4Bitcoins
This is a part of reddit.com.
Bitcoins for Gambling
If you are fond of gambling either online or physical, can bitcoins help you to dwell with it properly?
Good thing, there are gambling sites and casinos that do cater aficionados of Bitcoin. Here, there are lots of options such as online spread betting, jackpots, lottery, and other games. However, risks and pros and cons are being forced to in this endeavor.
Bitcoin Investment
Lots of Bitcoin supporters are believing and claiming that there is a future when it comes to digital currency. They are arguing that Bitcoin can endorse and facilitate payment free and faster transactions around the globe. Although this may not be backed up by any central bank or government, it can still be exchanged for any traditional currencies. Also, the dollar exchange rates attract a lot of potential traders and investors who have an interest in currency plays. Thus, Bitcoin is continuously growing, for it helps and supports digital currencies like traditional commodities and national fiat money san alternative.
Risks in Bitcoin Investment
Although Bitcoin is not designed to function as an equity investment normally, it still had drawn lots of investors with the digital money inclined with it. These were all appreciated way back in 2011 and 2013. Indeed, bitcoin became a trend for the value of its investment than the medium of exchange.
But Bitcoin lacks digital nature and guaranteed value, which means there are inherent risks in the use of bitcoins. Aside from that, alerts were already sent to the investors regarding the problem and risks brought by bitcoins. Some of the agencies that provide alerts are:
- Financial Industry Regulatory Authority
- Securities and Exchange Commissions
- Consumer Financial Protection Bureau
Risks in Insurances
The investments are being insured through the SIPC or the Securities Investor Protection Corporation. This agency provides ample welfare and protection to the account of the investment and its insurances. On the other hand, the FDIC or Federal Deposit Insurance Corporation is responsible for ensuring normal bank accounts up to an amount that depends on the jurisdiction.
In general, Bitcoin accounts and exchanges are not insured either by the government or federal program. Last year, the trading platform and prime dealer SFOX have announced that there can still be a supply for the Bitcoin investors as long as they have FDIC insurance. However, it will only be applicable for a little transaction with cash involvement.
Tax Risks of Bitcoin
Bitcoin is not eligible to be included in a tax-advantaged retirement account. There will be no good or even legal protection that can protect the investments from any taxation.
Related Terms
- Genesis Block
It refers to the first Bitcoin block that was mined. This block had been the foundation of the entire trading system of Bitcoin.
- Satoshi
Satoshi, on the other hand, refers to the smallest bitcoin cryptocurrency unit. This unit was named after the Bitcoin developer- Satoshi Nakamoto.
FAQs:
- Are the transactions and Bitcoin itself legal?
As of the first quarter of this year, Bitcoin is already legal in Japan, the United States, Canada, United Kingdom, and most developed countries. In terms of tax purposes, it is treated as property and not a currency. So basically, it is not considered legal tender.
- Is it a good investment?
Cryptocurrency is considered an effective and efficient online currency exchange platform. Yet, a lot of people end up buying bitcoins to invest out of it as well as the stocks. For that question, it is better to come up with investment purposes one at a time. Small steps and concepts can always cover the ground.