“Bitcoin” has been getting a huge traction recently. While some businesses are supporting the cryptocurrency, others are branding it as illegal. With a view to putting some light on the decentralized digital currency, we thought it’d be better to sum up the 10 most important things about bitcoin.
So, whether you want to have basic information about bitcoin or are willing to embrace this form of digital payment, read on to discover how it works as well as its pros and cons.
What Is Bitcoin – History, How It Works, Pros & Cons of Bitcoin
Introduced in 2008/2009 as Peer-to-Peer Electronic Cash System:
An anonymous group of people introduced Bitcoin in 2008 as a peer-to-peer electronic cash system. They used the pseudonym ‘Satoshi Nakamoto’ for this cash system. Satoshi can be loosely termed as wisdom or reason. It was released as open-source software in 2009.
Bitcoin has not so great history as it’s been used by hackers to demand ransom for the purchase of illegal drugs online.
Works as a Decentralized Currency
Bitcoin works as a decentralized currency, which is basically created, used and controlled by its users.
Its network reportedly has a finite supply of 21 million Bitcoins. The system is designed to regulate the generation of Bitcoins automatically so that growth of the currency remains steady.
The cryptocurrency system functions without a central repository or single administrator. The network is peer-to-peer and its transactions happen using cryptography.
The P2P transactions are verified by a network called nodes and they are recorded in a public distributed ledger known as blockchain.
2.9 to 5.8 Million Unique Users in 2017
Bitcoins are created as a reward through a method called mining. Till February 2015, more 100,000 merchants and vendors had accepted bitcoin as payment. According to a research conducted by Cambridge University in 2017, there are currently 2.9 to 5.8 million unique users of cryptocurrency wallet and a large number of them are using bitcoin.
Major Vulnerability was Spotted In 2010
On 6 August 2010, a big exploit was found in the bitcoin protocol. Due to the vulnerability transactions were not properly verified before being included in the blockchain. It allowed users to bypass bitcoin’s economic restrictions and generate end number of bitcoins. On 15 August, the loophole was exploited, and more 184 billion bitcoins were created in a single transaction.
However, the transaction was soon discovered and removed from the transaction log. Subsequently, the vulnerability was fixed.
Bitcoin was trading over $11,000
Recently, Bitcoin was trading over $11,000. As of writing this article, it’s trading around $10,000.
As per coindesk, a website that monitors the price, it has seen a tenfold increase from the start of the year. It was worth $1,000 at the beginning of 2017.
It’s Not Tied to a Bank or Government
Another significant thing about this digital currency is that it’s not tied to a bank or government. It lets users spend money anonymously. Users receive bitcoins in exchange. They can buy or sell coins on exchanges with US dollars and other currencies.
Bitcoins are Basically Lines Of Computer Code
Bitcoins are primary lines of computer code. They are signed whenever they are sent or received.
Since transactions are normally made anonymously, libertarians enthusiasts, speculators, and criminals can take undue advantage of it.
Special Market for the Currency Might Open In Near Future
Thanks to a huge media coverage and fast increasing popularity some businesses have started accepting it. The US exchange operator CME Group had said in October that it’s considering to open a market for the currency before the end of the year if it’s able to have the approval from regulators.
Many Still Consider It “Fraud”
Some high-profile banking executives have spoken against Bitcoin, with JPMorgan ChaseCEO Jamie Dimon calling it a “fraud.”
That said, JPMorgan is starting to use the underlying technology behind Bitcoin, known as Blockchain, as a potential way for banks to more accurately track trading and assets. There is a big debate going on for the usage of virtual currency among investors. For instance, Dimon and billionaire Mark Cuban are completely against it.
The Usage of Bitcoin Among Mainstream Merchants Is Limited
As of now, the usage of Bitcoin among mainstream merchants is quite low. Microsoft accepts it on Xbox and Windows Store platforms. Overstock.com also accepts it as a form of payment. Wall Street is reportedly building products around it.
The Advantages of Using Bitcoins
First and foremost, anyone can use Bitcoins as there is no restriction on age or country. Additionally, the digital currency is not liable to any government or financial institution at all.
As it’s a digital currency, you will be able to carry thousands of Bitcoins using your electronic device.
The transaction that takes place using Bitcoins is untraceable. Hence, there are no taxes on the transaction.
As compared to physical currency, Bitcoin is more secure and can’t be easily stolen. It’s because theft must have access to your authorized device to transfer them.
Once a transaction has taken place using Bitcoins, it can’t be reversed as the ownership changes instantly.
The Disadvantages of Using Bitcoins
The biggest disadvantage of Bitcoin is the volatility. Besides, its supply and demand are not tracked by any central authority.
Other loopholes in this digital currency could be frequent hacking attempts, confusion among buyers/users, ever-changing interest levels.
Knowing that Bitcoin transactions are not easily traceable, wrong-doers may use them for laundering money and illegal online transactions like buying drugs or illegal databases.