Bitcoin - virtual currency used in electronic transactions
Bitcoin's ups and downs are one of the major topics in the global economic press. Why is this internet creation so stimulating to the imaginations of millions of people? Why are economists paying so much attention to it? Discover the guide to the world of digital currency, which is Bitcoin.
What is Bitcoin?
Bitcoin is a virtual cryptocurrency, created in 2009 by unknown authors, operating under the pseudonym Satoshi Nakamoto. Its existence is based on an extremely advanced cryptography and P2P (peer-to-peer) exchange network, i.e. without intermediaries. Bitcoins can be used to finance various electronic transactions in a simple, fast and fairly secure way.
Use of Bitcoin
Basically anyone with a computer can mine Bitcoin. The creators of this currency were clearly inspired by gold - the method of obtaining it and its functions in the economy. Simply put, Bitcoin can be obtained by sharing the computing power of your computer. The cryptocurrency creation system works as a kind of perpetual motion machine - the work of "miners" PCs is needed to carry out Bitcoin transactions on the network. There is a catch, however, because for the average person the chances of mining one coin, worth almost a thousand dollars, are really slim. This is where great computing power is needed, obtained from entire farms of powerful servers.
Some entrepreneurs took the risk of buying powerful computers and paying huge electricity bills. Before they manage to mine a few Bitcoins, it may turn out that they have depreciated, thus generating a loss for the entire business. Interestingly, the authors of the cryptocurrency included in their concept a clever mechanism that regulates the excavations. Well, the more "miners" in a given period of time try to acquire digital coins, the more difficult this task is. When groups of prospectors give up on any further efforts, Bitcoin mining becomes easier, thereby encouraging new miners to take action.
Bitcoin - advantages and disadvantages
The most important advantage of cryptocurrency is the convenience of its use. As mentioned before, Bitcoins are not processed by any intermediaries during the transaction. With international trade based on traditional money, large costs are generated by currency conversion. In addition, the transferred Bitcoins are sent instantly to the target account - regardless of the countries from which participants take part in the transaction. Operating cryptocurrencies is extremely safe, much more reliable than transfers using classic money accounts. Even so, there have been reports of Bitcoin theft or loss, however, the scale is not comparable to the daily hacks of traditional bank accounts.
Bitcoin has a defensive mechanism against inflation - its resources will only increase to the limit of 21 million. It will take several more years to reach this barrier, as currently slightly more than half of the assumed amount is in circulation. Situations of "overprinting" money, known from the contemporary practice of states, are impossible to occur.
And the last, for many, key advantage of Bitcoins - they provide trustworthy anonymity during transactions. This convinces those who observe with fear subsequent reports about violations of internet users' privacy by government institutions of many countries. It is not surprising then that cryptocurrency is willingly used to pay for ... pornographic websites.
Along with the growing interest in Bitcoins like mushrooms after the rain, a lot of educational websites have been created to promote the advantages of virtual currency. You can read there reliable information about the strengths of using Bitcoin, but the disadvantages are most often overlooked. And it's worth taking a look at them because they question the sense of using digital coins in business. Bitcoins are in no way controlled by financial institutions, they do not have a central bank. No country can guarantee their stability and values with its authority. This makes the price of this cryptocurrency extremely speculative.
Quite a few economic authorities believe that Bitcoin is just another speculative bubble that will burst with a bang. Former US Federal Reserve chief Alan Greenspan is among the figures who share this view. Just look at the charts with the Bitcoin rate - an amazing jump up, fueled by the mass enthusiasm of the Internet community, and then a sharp plunge down (by almost half the value!), Caused by the decision of the Chinese authorities to ban this currency from being exchanged with domestic banks. On the day of writing, one Bitcoin cost $ 995 - who knows how much it costs at the time you read this, dear internet user.
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