It is really amazing to live in the digital era. Just every day, new breakthrough technologies emerge to unfix the established notions and change our lifestyle once and for all. Our parents could not even imagine that it would be possible to get online education, buy products and services without leaving your home and pay bills with the help of Internet banking. The time passes by, and these things are commonplace for us now. Though, progress is so fast, that it never lets you remain absolutely digitally savvy at this particular moment.
In 2008 the appearance of the digital currency named Bitcoin made feel advanced people a bit of dummies. The words cryptology, cryptography, Bitcoin mining, blockchain, dwdollar came into use. It took time to adopt this first electronic currency and use it in a daily life. As of now, the number of Bitcoin transactions per day exceeds 100,000. Besides, now it is possible to buy bitcoins with credit card. If these sentences were like mumbo jumbo and abracadabra to you, the message is clear. You are miles behind the innovations. Read on this article to know more about the virtual currency, its advantages and disadvantages, the ways of purchases and new opportunities.
Are Bitcoins ‘real’?
Having no opportunity to feel a bitcoin in your hand and hear it scrunching in your wallet makes it difficult to get to the meat of virtual money. It is the turn of such a long word as ‘cryptography’ to have its say. In laypeople terms, that is the study of how to secure your communication from being read and changed by third parties with the help of mathematics, electrical engineering and computer science.
In 1998 a terrific idea flashed into Wei Dai’s mind. The sense of it was to exclude middleman and central authority from participating in money transactions and empower cryptography to control creation and all transactions with money. As you might have guessed, cryptocurrency is the money governed by cryptography. A person or a group of people known under the name of Satoshi Nakamoto implemented the digital currency concept of Wei Dai and in 2009 released a software for Bitcoin, the first decentralized payment network. It is open-source and controlled by all users of this payment system. The unit of Bitcoin payment system is a bitcoin.
The expression ‘Money doesn’t smell’ is widely known. When it comes to digital money, or cryptocurrency, it does not only smell, but also does not have a physical form and does not take any space on your hard disc. It is just a record of a bitcoin transaction. Nevertheless, it is real, firstly, because you can buy physical goods with virtual money and, secondly, use it as an investment tool with the help of an online trading platform, such as the one available over on https://www.sofi.com/invest/buy-cryptocurrency/. In other words, any person can buy bitcoins, sell, invest, and spend them. These functions make it real and popular.
How do Bitcoins work?
When we turn on the light, we do not recall our school physics lessons and think of how electricity works. Analogically, when we search queries in the Internet, we do not spend time to understand the techniques used to find information requested and to show it on our screen. Bitcoin successfully operates whether you understand difficult mathematics standing behind it, or not. That’s why let’s focus on essential terms and mechanisms to know.
A blockchain goes hand in hand with cryptocurrency. Imagine a bookkeeping ledger where all business transactions and amounts are kept. A blockchain is a vast ledger recording all bitcoin transactions between different addresses. It is public, and every computer can check the validity of any transactions. There are two essential things you need to know to send bitcoins, they are a bitcoin address and a private key. That does not mean a street and the number of a house. An address in the bitcoin payment systems is just a random sequence of 32-33 numbers and letters. It is like an account number. A private key has nothing to do with an ordinary physical key. It is again a sequence of numbers and letters. It should be kept in secret and is needed to sign data.
Bitcoin mining is another interesting process. Its understanding is essential for operating in Bitcoin system. It is not physically hard as real extracting minerals from the ground, though it involves significant mental efforts to get the clue and learn to mine precious bitcoins. Mining process is aimed to confirm transactions and create new coins in a block. (Remember that this system is decentralized, and users are architects of their own fortunes). Mining bitcoins is to add the records took place into the blockchain. This ledger ensures all network is aware of any transactions, secures from re-spending and enables users check them at any moment. In simple words, to mine Bitcoins miners shuffle random data contained in a block and then calculate the hash. This term means a result of difficult mathematical calculations that is not possible to predict and guess. It is difficult to understand the principles applied. You never know what hash will be produced by a chunk a data in the result of shuffling. The final goal of such manipulations is to get the hash lower than one certain value. A miner sends the block with the hash to the network, waits for confirmation and gets a bitcoin reward, that is, of course, the most pleasant part of this process. For mining, you need special software and bitcoins purchased.
How to buy Bitcoins?
Digital money circulates in the digital world and is governed by special rules. The question ‘How to incorporate cryptocurrency into our daily life?’ is quite reasonable. We still live in a world in which cash and credit/debit cards are physical and millions of people have PayPal accounts. It is understandable why they want to buy Bitcoins with the help of traditional payment methods. The bad news is that as of now those PayPal users can not directly buy cryptocurrency via their accounts. The good news is that there is another way to obtain coins and there are platforms (like this kryptowährung kaufen plattform) that serve as a bridge between fiat currency, such as USD and EUR, and digital currency. If you have a MasterCard/Visa card linked to PayPal account is half the battle. The other half is to register in one of these platforms such as CEX.IO and link your profile to your card. That’s all! Just a few clicks are required to become a part of the Bitcoin payment system. In short, to buy Bitcoins you need to deposit money via your card or bank transfer and buy bitcoins.
The sequence of actions to link your card to a profile is a follows.
- Navigate Card Manager
- Enter the name of a cardholder, card number and its expiration date
- Take a picture of yourself with a card in your hand, a photo of you card and ID. Your face and information of your card and ID should be visible.
- Upload them.
- Pay a tiny charge (it will be transferred back to you later) and wait until your data is verified.
- Wait for the decision and proceed with Bitcoin exchange, purchase or sale.
With CEX.IO, deposist and withdrawal happens in less than no time. Besides, low fees charged delights a lot. And when a platform lowers them more, delight is doubled. Check out its website. The details are here. CEX.IO mobile application is available to buy bitcoins online from any spot of the Earth provided that the Internet is here. The example of CEX.IO platform shows how easy it is to perform bitcoin transaction despite complicated mathematics standing behind ‘mining’ cryptocurrency.
What are the perks and pitfalls of using Bitcoins?
What makes Bitcoins so attractive and why more and more people and businesses use this payment system? Below are the advantages of using Bitcoins.
- Bitcoins are yours and only yours. The central authority can’t take your cryptocurrency, because it does not print it, own it and control it correspondingly.
- Inflation is powerless in case with bitcoins. Inflation decreases the value of money and increases prices for services and goods. Central bank solves this problem usually by printing additional amount of money to fill in the gap. As the central bank has nothing to do with cryptocurrency, it can’t influence it. Supply and demand is the only regulating mechanism defining its value. Besides, 21 million digital coins can’t be exceeded. This limitation is another reason why electronic cash is inflationary.
- Fees to be paid for dealing with bitcoins are significantly lower than bank charges. In some cases, no fees are required at all. Saving money is not the last reason in favour of cryptocurrency amid the global financial crisis.
- If you want to send bitcoins somewhere or to receive them, neither location nor time matters any more. Since no intermediates are involved, you are absolutely free to send electronic cash at any moment and any place. Independence and freedom are the key characteristics of Bitcoin system.
- As mentioned above, all transactions are recorded in the blockchain. That makes Bitcoin system absolutely transparent. Anyone can check all information related to digital cash supply at any time. You can enter an address, block or transaction and get a full report. Since all protocols are protected with the help of cryptography, nobody can manipulate and change data. Under all information it is meant where transactions were sent to and came from. Though, who is the owner of that particular bitcoin address is a secret that is not revealed by any means.
- When you decide on which bank to choose to deposit your money, you have to do thorough researches to find that one you can rely on. You ask for recommendations and study their rates and reputation. In case of digital currency, all these activities have no sense. Mathematics will not fail, and bitcoin system is totally independent on any authorities. To trust or not to trust is no longer a question here.
- Bitcoins sent are bitcoins lost. In other words, you can’t retrieve bitcoins if the recipient does not agree to send them back. That excludes fraud often happened while using a credit card.
Pros for becoming a user of Bitcoin system are quite impressive. Though, it is not flawless and has some features with a minus sigh to be kept in mind.
- A bitcoin has a high volatility. By comparison, in 2014 it was seven times higher than gold and eighteen times higher that USD. Opinions why volatility is so great differ. Some say it is due to absence of stabilization mechanism. Others think it is normal because bitcoins are the first startup currency and is in process of stabilizing.
- Bitcoin system is being developed. And that’s why not all features are polished. It can be compared with a baby learning speaking, eating and walking. Some time is required for it to mature and improve.
- Cryptocurrency is innovation, and nobody knows what it’ll become in future. Uncertainty is high. Though, risks related to operating with fiat money are not lower.
What are the prospects?
Despite some difficult factors related to mining bitcoins and some incompleteness, a number of businesses and users are exponentially growing. The places to spend your bitcoins increase. Microsoft sells a lot of digital content for bitcoins. The company Dell even offers discounts to those customers who pay bitcoins. In case you can’t find services and goods sold for bitcoins online or in a retail chain, a gift card is another option to use your cryptocurrency. You can pay for gift cards with bitcoins. Such retailers as Amazon, Wallmart, Amazon, Target and so on will open their doors with their gift cards you can buy with digital money. Though as of now bitcoins are useless in case you want to travel around the world without any cash and credit cards. Just imagine how it is convenient to go any place and do not bother yourself with currency exchanging and worries to lose your wallet and cards. However, cryptocurrency is on its way to overcome any difficulties and borders.
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