Bitcoin peaked at an all-time high of $16,699 on December 8, 2017, and made the headlines across the globe.
Bitcoin is no doubt innovative as a payment option, and it runs on Blockchain technology.
An understanding of the Blockchain is equally important for anyone who is keen to follow-up on its underlying basics. Blockchain is best described as a distributed ledger that operates within a decentralized network of linked computers, nodes and devices.
There is no central control over the Blockchain, and it can be accessed anywhere around the globe.
The use of Blockchain extends across several spheres of human endeavor from medicine to shipping, payment systems to database validation, etc.
Payroll processing, invoice management, and Insurance are some of the other facets of life that are revolutionized by the Blockchain. Bitcoin value in itself can be traced to the transparency, traceability, and auditable nature of the Blockchain.
How Bitcoin is Created
Bitcoin arose from the innovative work of Satoshi Nakamoto, who laid out the specification and operating methodology. Satoshi did not create Bitcoin alone, as he worked with other developers on the project. As a result of this approach, Bitcoin operates as an open source and decentralized platform.
While many people have wondered whether Satoshi was a pseudonym or a true identity; the answer remains unknown. Other collaborators on the Bitcoin project are Gavin Andresen, Jeff Garzik, Mike Hearn, among others. Bitcoin is definitely the outcome of a painstaking work that includes the footprints of several people.
Bitcoin is created when a computational difficulty is solved on the Bitcoin Blockchain, and this is rewarded through block rewards. Block rewards are given to miners who successfully completed the recognized process that gives rise to a Bitcoin. Block rewards are not arbitrary as they are subject to a verification process built-in as a part of the Bitcoin algorithm.
The Acceptance of Bitcoin
Bitcoin has come a long way since it was first introduced in 1998, and it has become a global currency without boundaries. The value of Bitcoin is universal, and it is accepted as a means of payment in many countries on earth. The popularity of Bitcoin has given rise to alternative coins (or altcoins) like Ethereum, Bitcoin Cash, Ripple, among others.
You can shop online and buy a range of goods and pay for services with Bitcoin. Many merchants accept Bitcoin as a means of exchange, and this has become easier with the issuance of Bitcoin debit cards.
The bandwagon effect of Bitcoin has led to a growing acceptance of the altcoins, and this can be seen in the increasing market activity. For example, ethereum price leaped to its highest peak of $1,389 on January 15, 2018 as the demand for it exploded. Bitcoin is accepted by businesses like Microsoft, Dell, WordPress, and PayPal.
Answers to Important Questions – There are some important questions that newbies always ask about Bitcoin. Here are the major ones you should know:
What Drives The Price of Bitcoin?
Bitcoin derives its price from the interplay of the forces of demand and supply. As people increasingly acquire it, the price soars and the inverse leads to a price drop as demand reduces. Bitcoin can then be seen in the likeness of gold or diamond that is scarce in supply.
Bitcoin is limited in supply to the tune of only 21,000,000, and about 17,000,000 of these are in supply at present. It is not known if any change can be made successfully to the underlying framework of Bitcoin; otherwise, it has a fixed supply.
Is Bitcoin Legal?
Bitcoin has attracted lots of controversies in the course of the last few months as a result of concerns and misrepresentations. The United States, Europe, and several countries have accepted Bitcoin as legit, and efforts are being made to regulate it. This is not to say that it faces opposition in a couple of countries.
In China, Bitcoin is illegal, and South Korea has also imposed a couple of restrictions on it. A few other countries have come up with laws to restrict its use. However, an overwhelming number of countries are open to Bitcoin.
Are Bitcoin Transactions free?
One important aspect of Bitcoin transactions is the fact that it also attracts transaction fees. While the fees charged might vary according to the processor, transacting in Bitcoin is not free. When you buy Bitcoin, you have to pay trading fees, and if you exchange it for fiat money, you will incur charges.
What is a Bitcoin Account Like?
Bitcoin is stored in an account that you can liken to a Bank account. The difference is that unlike a Bank account, your Bitcoin account is a virtual Bitcoin wallet. There is a unique address for each Bitcoin wallet that is created, and you can use it globally.
On a trading exchange, when you create your account, your Bitcoin wallet address is automatically created. You can choose to leave your Bitcoin on the exchange for trading or withdraw it to a private Bitcoin wallet. There are hardware, online, mobile, paper, web, brain, multi-sig, desktop wallets for Bitcoin.
There are different kinds of non-exchange wallets that you can use to store your Bitcoin for security purposes. Every wallet has a public wallet address and a private key used for accessing it. Your private key is like your password for emails.
Where Do I Buy Bitcoin?
Bitcoin can be bought in a variety of ways depending on where you live on earth. The following options are widely used:
1) Peer-to-Peer Avenues
Peer-to-Peer avenues like LocalBitcoins give you an opportunity to buy Bitcoin. You will need to register an account on the platform to be able to use the platform to buy Bitcoin. Sellers and buyers are registered on LocalBitcoins to facilitate Bitcoin trading.
2) Bitcoin Exchanges
Bitcoin can also be bought by using an exchange. In any of the exchanges like Coinbase, Binance or Poloniex, you need to provide your personal details to register an account and be validated. While Coinbase is restricted to users from America and a few countries, you can register on Poloniex and Binance from other countries.
3) Bitcoin ATM
Bitcoin ATMs are increasingly becoming a glaring feature in major global cities. In America, Europe, Asia and South Africa, there are Bitcoin ATMs that give you a chance to buy Bitcoin. You need to have your Bitcoin account barcode scanned at the ATM to buy the quantity of your choice.
If there is a Bitcoin ATM around where you live or visit, you can locate it on Google Map and buy your Bitcoin with ease.
4) Mobile Apps
Buying Bitcoin is now easier than ever before with several apps on mobile phones now making it easier to do so. The Square app can be used to buy and sell bitcoin on your mobile phone.
Several other apps have a similar function, and they can be downloaded from Google Play and Apple iStore.
Can I Lose My Bitcoin?
Bitcoin is safe if you have it stored in your private wallet. There is a difference between storing your Bitcoin in your trading exchange wallet and a private wallet. Your trading exchange wallet is considered to be risky to store your Bitcoin.
When hackers attack exchanges or there is a system breakdown, you can lose access to your Bitcoin. To prevent this, it is advisable to use a hardware wallet for storage. Trezor and Ledgerwallet are two of the best known hardware Bitcoin wallets.
You can also lose your Bitcoin if you send it to a wrong address. It is important that you use ‘CTRL C’ on your keyboard when copying a recipient’s address. If you send Bitcoin to an unknown address, there is no way to claim it back at present.
Can I Mine Bitcoin?
Bitcoin can be mined by anyone who is interested in doing so. There are a few options when it comes to mining Bitcoin. You can decide to buy a mining gadget for that purpose and this is a common practice in many countries.
While the profitability of the mining exercise also depends on the market price of Bitcoin, the electricity implications have to be evaluated. As Bitcoin surges in market price, mining becomes more lucrative, and a crash in market price also means that you could incur losses.
You can also decide to use your PC for Bitcoin mining, and this will require that you download a Bitcoin mining extension by using your browser. Using a browser extension for Bitcoin mining is a rather passive means to earn an income. You will be credited a share of the Bitcoin mined with your browser by the service provider.
The outlook for Bitcoin looks bright with many countries opting for regulation instead of a ban. This perception is a green light for many people as they look out for ways to share in the Bitcoin boom. Evidently, Bitcoin will wax stronger in the days ahead.