Bitcoin has been around for almost a decade but its popularity still isn’t widespread in the world. Yes, most people have heard about it, but how many are actually aware of how this system works? The answer is: not so many.
What is it?
The origins of Bitcoin can be traced back to 2008 when an anonymous programmer going by the name of Satoshi Nakamoto suggested that an independent online currency should be created. What this means in words is that Bitcoin is a cryptocurrency and a digital payment system. It is just like any other currency but the main big difference is that there is no government or an institution regulating it. It is completely decentralized. Bitcoin is basically a digital file or a ledger that contains names and balances.
All of this also means that the “middle-man” has been cut off the equation and that buyers and sellers interact with each other directly. All of this happens under the supervision of all other Bitcoin users or holders. There are very little administration costs, no bureaucracy, and the currency is good all over the world. There are no currency exchange rates or anything like it.
How it works.
Being a cryptocurrency Bitcoin doesn’t allow anyone to copy, well…Bitcoins. It would otherwise devalue the currency and make it useless. This is achieved by special encodings into which we won’t dabble now. The ledger we mentioned above basically consists of block chains which are coded onto the Bitcoin itself. This is important because it ensures that no single coin can be spent more than once before reaching any one person. So if you make payments to two people at the same time trying to distribute only one Bitcoin then the ledger and its algorithm will determine that one of the people you are paying will come first in the blockchain. This will prevent the second transaction from going through thus allowing you to cheat the system and getting two items at the price of one.
How to get some Bitcoin?
The easiest way to enter the system is by spending your own country’s currency and convert it into Bitcoin. As of 2017 one Bitcoin costs about $1,000. A few years ago the price was sitting at about $200. Many people are kicking themselves for not entering this market earlier.
Another way is to simply sell things online in exchange for Bitcoin. It might take a while before you earn a satisfactory amount but it is still something.
Finally, you can do Bitcoin mining. If you have the knowledge and your computer has the hardware to solve complicated mathematical problems then you can be in business. Bitcoin miners contribute to the smooth running of the blockchain mentioned above. They somewhat provide a public good. They relay transaction, verify signatures, “put them into a block”, and distribute that block to everyone. This is generating Bitcoin out of thin air and is something that is estimated to stop in 2140.
As you can see Bitcoin is a revolutionary way of completing transactions online without a commission and a very little chance of fraud or theft. It is also a form of investment as the volatility of the currency can be exceptionally rewarding to those who make the right choices.