Understanding Bitcoins and Their Advantages Over Regular Currencies
Bitcoin is a kind of digital currency made and stored electronically. Unlike dollars or euros, they are not controlled by any party. They don’t exist in paper, but are instead produced by persons as well as businesses with the use of software that solves mathematical problems.
Bitcoins and Cryptocurrencies
Bitcoins are the first in an emergent category of money referred to as cryptocurrency. Traditional currency is based on gold or silver. You know that if you put a dollar in the bank, you will get some gold in return, although is purely theoretical. Bitcoins, however, are based on mathematics instead of precious metals. In various places around the globe, people make use of software that follows a mathematical formula as part of the bitcoin production process. Since the mathematical formula is available to all, anyone can check it. Even the software is open source, which means everybody can pitch in to make sure that it does what it should.
Advantages over Traditional Currencies
Bitcoins can be used to purchase things digitally. In that sense, it’s the same as traditional currencies, which are also traded this way. But there are several advantages offered by bitcoins, including:
The bitcoin network is not under any central authority. Every bitcoin-mining machine that processes transactions is part and parcel of an entire network, where all the machines work together. Hence, theoretically speaking, no central authority will be able to change or interfere with monetary policy and start a meltdown – or simply decide to seize bitcoins from their owners. And in case a part of the network goes offline for any reason, the money will continue to flow.
Traditional banks can have so many and sometimes unnecessary requirements before you can open a basic account with them. Setting up a merchant account for payment is yet another bureaucracy-complicated task. In contrast, it only takes seconds to set up your bitcoin address, no fees or questions at that.
Bitcoin accounts are anynymous – sort of. You can have several bitcoin addresses, and they won’t be linked to names, addresses, or any other piece of information that could provide a hint of your identity. However, the bitcoin network will keep all the details of each transaction you have made in a giant electronic ledger called the blockchain. The blockchain knows everything. If your bitcoin address is set at public, anyone will be able to see tell how many bitcoins you have stored at that address. But they won’t know that it’s yours. There are many steps you can take to protect their anonymity on the bitcoin network, like using different bitcoin addresses for different transactions and not moving a lot of bitcoins to a one address.
Small International Transfer Costs
Transaction fees using bitcoins are minuscule in comparison to what banks charge for international transfers.
Speed and Non-Repudiability
Using bitcoins, you will be able to send money anywhere in a matter of minutes. Finally, it’s non-repudiable. The moment your bitcoins are sent, there’s no recovering them, unless the recipient sends them back to you.
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