You have heard about how this amazing thing that we can neither touch nor feel has been making the lucky amongst us huge money all through the year.
Bitcoin has had a fantastic year and those who have been on board have reaped tremendous benefits. This is probably why interest from big-time investors and everyday people has peaked – we all need to know what all the fuss is about.
So what is it?
Is it legal? How do I get mine? These are some of the questions we intend to answer in this piece away from all the technical jargon, so we can all get a better understanding.
So remember your cash that is in your wallet? When you take it out, take it to the bank and give it in for safekeeping, it mysteriously turns into mere figures on your screen, attached to your Credit/Debit Card.
In a way, you could say your money now resides in the virtual world, although you still have the option of getting the physical cash whenever you need.
Bitcoin in the same vein is a virtual currency, however, it is not just virtual for transitional periods. It is a fully virtual currency that is not issued by any government, but one that which is produced through the solving of huge mathematical puzzles, by computers that use specialized equipments.
Bitcoin is completely decentralized, and it cannot be counterfeited or compromised due to the underlying technology that was used to create it. This is called blockchain technology.
What is Blockchain Technology?
Blockchain technology is an open ledger system that is used to create, record, and verify transactions by the total sum of connected computers all over the world.
Transactions conducted must be verified as 100% genuine by each participating computer, while a consensus is needed to add it on the blockchain.
This completely reliable and unhackable technology is the backbone on which Bitcoin and a host of other cryptocurrencies were created from.
It is the immutability and high level of privacy that gives this technology the potential to be used in a wide number of industries such as health insurance, banking and self-driving vehicles.
What are the characteristics of Bitcoin?
The fact that Bitcoin is not issued or backed by any government in the world makes it an enigma as to why it continues to achieve breathtaking success in the financial markets. The reasons are not too far off, as Bitcoin has certain characteristics that guarantee its value.
Decentralization: Bitcoin as a cryptocurrency is fully decentralized and is not issued by any single entity. It works over a large network of computers spread all around the world and as such cannot be shut down by any government or single entity which guarantees its continued existence. Being a decentralized and virtual currency, Bitcoin is produced (mined), banked (in wallets), and transacted with, without resorting to banks or any other established financial vehicles. Its transactions are completely borderless, as Bitcoin can be sent to any country in the world in split seconds without worry about red tape.
Anonymity: Bitcoin is extremely attractive to its users because it is one of the most private means of conducting transactions. Any amount of Bitcoin sent from one user to the other only carries the wallet address of the sender, as no personal information such as names and IDs are required before using it.
Speed: Bitcoin from its inception was conceptualized as the fastest means of sending money to all corners of the world without censure or delay. Its creator, Satoshi Nakamoto, designed Bitcoin in such a way that it is faster and cheaper to receive than Western Union.
Immutability: The blockchain technology on which Bitcoin is built guarantees its genuineness, in that the sheer amount of computational power that is required to shut down or hack the Bitcoin blockchain cannot be summoned by any single entity or government anywhere in the world. This means any Bitcoin you send or receive is completely genuine and cannot be counterfeited like fiat currency.
Limited Supply: One of the biggest things that ensures the constant rise of Bitcoin is that it has a finite supply, which is pegged at 21,000,000 Bitcoins. This gives it similar characteristics to gold and other precious metals, as its supply nears its end, its price goes further up.
Is it legal to own Bitcoin?
Bitcoin is a new world order and as of yet, there is no country in the world with any comprehensive legal framework to handle it. Most governments around the world are silent about it, so it is safe to say that it is not unlawful as no government or international body has declared its use as illegal.
Moreover, Bitcoin is now very much a mainstream currency as it has a total worth of over $100 billion with some high profile investors, meaning it is highly unlikely to be banned in the future.
How much is Bitcoin?
Bitcoin has no fixed price, as it fluctuates up and down like every other financial instrument. Prices are highly volatile and can go swing up and down with high variations. But on the whole, its appreciation is historically greater than its depreciation. Within this year alone, Bitcoin has multiplied its value over 7 times.
How do I get Bitcoin?
There are two broad ways to acquire Bitcoin. One is through “mining” which is a long, technical and highly capital intensive. Or you could simply purchase any amount you need through what is known as cryptocurrency exchanges.
These are established companies that deal solely in the buying and selling of Bitcoin and other cryptocurrencies around the world.
How do I store my Bitcoin?
Once you are able to buy your Bitcoin from an exchange, it is advised to have a Bitcoin wallet at hand with which you will save your holdings. The best wallet you can have is one that is big on security and completely offline to keep it safe from thieves.
There are many reputable software wallets that you can easily store on your PC, but if your Bitcoin is considerable in volume, it is advised that you should instead opt for a highly secure hardware wallet.