What is Bitcoin? Everything you need to know about the infamous cryptocurrency
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(Pocket-lint) – The price of Bitcoin has skyrocketed in recent years, but many people are still confused by what exactly it is – so let’s explain!
Bitcoin is a virtual currency known as a “cryptocurrency”. It allowed people to quickly move money around the world without central oversight, enabling a dizzying array of new applications. Anyone can own and use Bitcoin, and it’s easy to get started.
What is the history of bitcoin?
Bitcoin was first described in a white paper, uploaded in 2008 to the P2P Foundation website by an anonymous author known only as “Satoshi Nakamoto”. It detailed a virtual currency, with a decentralized structure that meant it didn’t need a central bank. This is made possible by the blockchain, a public ledger that records every transaction and ensures that hackers cannot get away with people’s cryptocurrency.
From an outsider’s perspective, that might sound like a lot of hype. Bitcoin prices have continued to soar over time, confusing some – but if you see Bitcoin as playing a big role in future finances, it is seriously undervalued given its ever-increasing market capitalization.
Is Bitcoin secure?
Part of what makes Bitcoin so revolutionary is the blockchain, which solves a big computational problem around how to trust digital data. In short, everyone in the network has the same public ledger on their computer. When a Bitcoin is spent, a “miner” uses their computer to solve a complex mathematical problem and add the changes to the public ledger. If the other minors agree, the change is made.
If the network cannot accept that a new block is valid, it is rejected to protect against hacking. This consensus method got developers excited, as the blockchain could also store identity information, votes, and other secure information that could be subject to attack.
How do you earn Bitcoin?
The miner is rewarded for their computing power with Bitcoin, and this is how new coins enter the network. The reward for creating a block and adding it to the halves of the chain at regular intervals. The maximum number of Bitcoins is designed to be 21 million, but thanks to the halving process, miners shouldn’t reach that figure until 2140.
In fact, using Bitcoin is simple. People use a “wallet” to store Bitcoin, a method of storing private keys that refer to coins. These can be software-based or hardware-based, but the bottom line is that they’re secure. People then use exchanges to buy and sell their coins using real-world currencies or other cryptocurrencies. Services like Coinbase and Abra combine an exchange with a wallet, allowing users to buy Bitcoin, store it, and sell it through a single app.
How do you trade Bitcoin?
To send and receive Bitcoin, people use addresses. Much like how people use email addresses to send digital messages around the world, Bitcoin addresses are how people send cryptocurrency coins to friends and businesses regardless of time or location. place. Although it’s normally an indecipherable string of letters and numbers, some wallets offer a QR code to allow a user to scan with their smartphone.
Note that you can send any value of Bitcoin you want. Unlike currencies like the British Pound which are divisible by 100 in pennies and nothing more, people trade Bitcoin of any size all the time. If you see a jumper of £6 online and want to buy it with Bitcoin, it doesn’t matter if the price of a single coin is £3 or £30,000 – you can send an amount equivalent to £6 at any time.
What impact has Bitcoin had?
Due to these advantages, Bitcoin has enabled new business models. The New York-based Dumbo Moving Company made headlines in December 2017 when it started accepting cryptocurrency for jobs. Working in an international city, the company received many orders from customers wishing to pay with a credit card abroad.
Unlike credit cards susceptible to backorders and fraud, Bitcoin is a universal cryptocurrency that works the same for everyone in the world. It’s also similar to cash, in that exchanging the coin gives the recipient peace of mind that the transaction can’t be undone.
A number of companies have started accepting bitcoin as a form of payment. Microsoft accepts payments in its online store, while Wikipedia takes donations in cryptocurrency. Small businesses on Etsy and Instagram are also known to accept Bitcoin as a secure international payment method that requires no setup. Point-of-sale company Square has also rolled out support.
What are the disadvantages of Bitcoin?
However, Bitcoin also faces some challenges. This miner solving complex math problems follows what’s called ‘proof of work’, and it’s a process that has drawn criticism for using too much energy and rewarding people for setting up giant computer farms.
Researcher Alex de Vries found in December 2017 that Bitcoin uses around 32.26 terawatt hours of energy per year, more than Serbia. Other cryptocurrencies use methods like “proof of stake,” which incentivizes people based on their stake in a network, but these methods raise other issues.
Cryptocurrency also struggles with speed. While a regular credit card network can process around 50,000 transactions per second globally, Bitcoin can only process around seven. Developers are looking at ways to speed this up, with a proposed solution called Lightning Network potentially enabling billions in transfers per second.
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While Bitcoin has dominated the cryptocurrency space for most of the past decade, it’s a diverse market. More than half of the market value is tied to so-called “altcoins” like Ethereum, Ripple, Bitcoin Cash, and Litecoin. These boast variable changes that make them ideal for different uses: Ethereum, for example, supports “smart contracts” that automatically transfer money when certain conditions are met.
For now, however, Bitcoin’s widespread use and market dominance make it ideal for trading cryptocurrency with the greatest number of people.
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Written by Mike Brown. Edited by Max Freeman-Mills.