Everything You Need to Know about Bitcoin

You must have heard about Bitcoin already – it is a form of digital currency which is being given the limelight recently. Before you understand what Bitcoin is, you have to understand what digital currency it – it is the money that is entirely collected and stored on a virtual platform.

Saying Bitcoin is just a digital currency though, would be saying that it is the tip of the iceberg. It is so much more than that – in fact so much that even the economists are struggling to find the right term to describe it.

The main idea is to have a currency that is not controlled by anyone. Since they are held electronically and aren’t printed like the normal currencies, it does not fall under any single person’s domain. Rather, this type of currency is produced by common people. But besides that, it is also a method of making online payments, just like PayPal or Payza.

This type of money is called crypto currency, as Bitcoin is one of the firsts of its kinds.

Who Created This System?

Bitcoin was created by a software developer named Satoshi Nakamoto. He proposed the idea of creating virtual coins which also serve as an electronic payment system. His idea was totally based on a mathematical proof and at the end of the day it did work.

His main idea was to create a currency which is not bound around any central authority; also one which can help processing the electronic payments with very little transaction fees. However, Satoshi Nakamoto lives under complete anonymity which adds a tinge of mystery to the whole system. It was said that this man as from Japan, but his email ID showed that he was from Germany. Also, if the man behind this system was Japanese, would not this site be released in a Japanese version at least? That was also not the case.

This man released the Bitcoin system and also the Bitcoin software on which this whole thing runs in the year 2009. But after this, the man seems to have completely gone off the grid – no one knows where he resides or who this man exactly is!

Of course this system was not designed by him; he was helped by a few other developers who were in contact with him. But after 2010, every one of them seemed to lose contact with him.

Some people go as far to say that his name was just a quick mash up of all the popular names of the companies such as SAmsung, TOSHIba, NAKAmichi and MOTOrola. But what this man left behind is a system that many tech guys only dreamed about creating!

So How can I Use Bitcoin?

Image Source: www.flickr.com

Image Source: www.flickr.com

If you want a digital wallet, then you can use Bitcoin. Basically, it will manage your wallet. You don’t need to worry about security issues when you are using Bitcoin. It is safe for use. In fact, you can have as many Bitcoin addresses as you like, whereby you can get payments from other sources.

You can use your Bitcoin address on top of your Tor to prevent anyone from tracking down your IP address. This way Bitcoin also ensures that you have total anonymity when you are using their site.

Bitcoins here is a currency in itself. So it is used in exchange of something or some services you give to others. Majorly, there are three ways of using this system:

  1. You can use ‘mining’ to create your own system of Bitcoins.
  2. Exchange your currency for bitcoins. For example, exchange Euros for bitcoins with use of bitcoin provider called Mt.Gox.
  3. You can ask others to pay you in bitcoins for your services.

What is Mining and How to Trade with Bitcoins?

Image Source - commons.wikimedia.org

Image Source – commons.wikimedia.org

Mining is everything in the world of Bitcoin. Mining is how one gets a Bitcoin currency. In fact, it is a business process. Many people in the world today are mining bitcoins to generate profit. Bitcoins are minted using this mining process through software called Bitcoin miner.

There is a whole mathematical algorithm that looks for a big block in the Bitcoin network. Each time a new block is found in this network, the user is gifted with 50 Bitcoins.

Bitcoin uses the mathematical cryptography to hold an account in the public ledger for you. You have to always have this key so that you are able to tackle your accounts. But besides that you also need to have an address. This address will help others to transfer Bitcoins to your account. The crypto key and the address and the entire math in between must add up or the transaction will be rejected. However, Bitcoin has been tried and tested over the time and usually it does not disappoint like that. It does help the math add up.

But you can also get apps to manage your wallets. With these Bitcoins, you can easily pay to the pizza place that accepts Bitcoins as payments. Also you can donate money to the church and pretty much do anything. All you need to have is this virtual Bitcoin service.

Can I Buy Bitcoins?

It is not that easy to buy Bitcoins with PayPal or any other transaction account. This is simply because these transactions can be reversed with just a phone call. However, it might largely depend upon the area that you live in.

For US citizens, Coinbase and Circle are good areas that offer purchases with credit cards for Bitcoins. Some other methods such as Coincorner offer these services in the UK.

But if you really want to get a Bitcoin, then you must follow the rules of Bitcoin – since it is not a currency in the normal sense, using different methods might not be useful. So the very first thing which you have to do to get a Bitcoin is to register with a Bitcoin Wallet.

  • Getting a Bitcoin Wallet:

A bitcoin wallet is just like a bank account. But this wallet is the place where you store all your Bitcoin currencies. Here the security levels are different. This means if you want an account with a tighter security, then you will get tout protection. But if you are to trade with everyday payments like making a payment online, then you don’t need such a high grade protection, because this can also block your transaction many times. The ones with lesser security are still secure, but they work just like the pocket wallet.

Depending on your needs, you can get software installed on the hard drive of your computer, or an online, web based software which will protect your coins or an offline solution which will keep track of your bitcoins. The third type will use a series of code to protect your wallet.

  • Accumulate Bitcoins

Once you have got the bitcoin wallet, comes the part where you are spending those coins. For this you will need the access of your own currency and turn them into bitcoins. Here is where the exchanges and wallets come into place. You will find many wallet services, some of which are very basic and contain limited buying and selling privileges, while others are expansive and will store the digital or fiat currency for you. This type of exchange works just like the regular bank.

Exchanges and wallets are the best option if you want to engage in regular trading. For knowing the best one for your case, you have to get the details of Bitcoin services in your country.

Bitcoins in USA

Image Source: commons.wikimedia.org

Image Source: commons.wikimedia.org

Bitcoin has become a currency in itself and the government has tried to put as many roadblocks on its way as possible. It is an extremely low cost transaction platform and therefore it could become a threat to transaction websites like PayPal and Western Union. Bitcoin allows you to move money anywhere in the world without any cost!

This currency as of now is doing very well in China, Europe, Japan and Canada, but it is facing some roadblocks in the US.

Earlier Jennifer Shasky Calvery, the director of the Treasury Department’s Financial Crimes Enforcement Network said “So often, when there is a new type of financial service or a new player in the financial industry, the first reaction by those of us who are concerned about money laundering or terrorist finance (sic), but it’s also important that we step back and recognize that innovation is a very important part of our economy.”

Only time will tell as to what path the Bitcoin will take and how long would it survive and what greater heights it will reach.

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