Bitcoin (BTC) is a new type of digital currency – with cryptographic keys – which is decentralized integrated into a computer network that is used by users and miners around the world and is not managed by a single organization or government. It is the first digital crypto currency that attracted public attention and was accepted by more and more traders. As with other currencies, users can use digital currencies to purchase goods and services online and in some physical stores that accept them as a payment method. Forex traders can also trade now on bitcoin exchanges.
There are several key differences between Bitcoin and traditional currencies (e.g., the US dollar):
Bitcoin does not have a central authority or clearing house (eg, government, central bank, MasterCard, or Visa network). Users and miners around the world operate the peer-to-peer payment network. The currency is transferred anonymously directly between users on the Internet without going through a clearinghouse. This means that the transaction costs are much lower.
Bitcoin was developed through a process called Bitcoin Mining. News companies around the world use software and mining to solve complex algorithms and support Bitcoin transactions. You will be rewarded with transaction fees and new Bitcoins generated by solving Bitcoin algorithms.
There is a limited amount of Bitcoin in circulation. According to the blockchain, around 12.1 million were in circulation on December 20, 2013. The difficulty of extracting bitcoins (solving algorithms) becomes more difficult as more bitcoins are generated, and the maximum in circulation is limited to 21 million. The limit is only reached around 2140. This makes bitcoins more valuable because more people use them.
A public register called “Blockchain” records all Bitcoin transactions and shows the respective interests of each Bitcoin owner. Everyone has access to the ledger for reviewing transactions. This makes the digital currency more transparent and predictable. Above all, the transparency prevents fraud and duplication of the bitcoins themselves.
Digital currencies can be obtained through bitcoin mining or bitcoin exchanges.
Digital currencies are accepted by a limited number of Internet sellers and certain physical retailers.
Bitcoin wallets (similar to PayPal accounts) are used to store bitcoins, private keys, and public addresses and to transfer bitcoins anonymously between users.
Bitcoins are not insured and are not protected by government agencies. Therefore, they cannot be restored if the secret keys have been stolen by a hacker or lost on a faulty hard drive or because a Bitcoin exchange has been closed. If secret keys are lost, the associated bitcoins cannot be restored and are no longer in circulation. Visit this link for frequently asked questions about Bitcoin.
I think Bitcoin is more accepted by the public because users can remain anonymous when purchasing goods and services online. Transaction costs are much lower than with credit card payment networks. The ledger is accessible to all and can be used to prevent fraud. The supply of currency is limited to 21 million, and the payment network is managed by users and miners and not by a central authority.
However, I don’t think it is an excellent investment vehicle, as it is extremely volatile and unstable. For example, the price of Bitcoin rose from around $ 14 this year to a high of $ 1,200 before dropping to $ 632 per BTC at the time of writing.
Bitcoin has risen this year as investors speculate that the currency will be widely accepted and that prices will rise. The currency fell 50% in December when BTC China (the largest bitcoin operator in China) announced that it could no longer accept new deposits due to government regulations. According to Bloomberg, the Chinese central bank has banned financial institutions and payment companies from processing Bitcoin transactions.
Bitcoin is likely to find greater public acceptance over time, but the price is extremely volatile and very sensitive to news such as government regulations and restrictions that may have a negative impact on the currency.
