What is Bitcoin and What Can It Be Used For?

what is bitcoin

Bitcoin is just one of the many cryptocurrencies available today. These digital coins or virtual currencies exist digitally and use cryptography for security. It is basically like any traditional or fiat currency, but solely digital—no physical coins or paper bills for you to keep and hold. It is stored in a digital or bitcoin wallet, which is accessible through a user’s cloud, computer, or smartphone.

As of the time of writing (September 19, 2019), there are over 2,870 cryptocurrencies available in the market. This is according to the data provided by the Coin Market Cap. The top five cryptocurrencies among the thousands include Litecoin (LTC), Bitcoin Cash (BCH), Ripple (XRP), Ethereum (ETH), and the leading cryptocurrency Bitcoin (BTC).

This leading cryptocurrency is continuously reaping popularity in the finance and technology sectors and is gaining high levels of adoption, little by little.

Getting started with Bitcoin

Bitcoin, abbreviated as BTC, is a cryptocurrency created 10 years ago by an anonymous person or group of individuals using the alias Satoshi Nakamoto. While there were several people who claim to be the real Satoshi Nakamoto, the mind behind this giant innovation is yet to be known as of press time.

Bitcoin’s value is absolutely growing day by day and is undoubtedly reaching extremely high amounts. With this, buying one whole bitcoin will make it inaccessible to most individuals. However, this cryptocurrency is divisible to eight decimal places, making it possible to buy fractions of bitcoin. The smallest unit of this cryptocurrency that is recorded on the blockchain is called a satoshi (0.00000001 BTC).

This cryptocurrency is dubbed as a unique and innovative model of payment and a modern type of money. It uses cryptography or a way of keeping communications and information protected through the use of codes that can only be read and processed by the user to whom it is intended to be sent. Cryptography is used by bitcoin to secure, process, and verify transactions that are taking place on its network.

Bitcoin is also compared with gold due to some similarities in features of both assets. Bitcoin and gold might not be alike in terms of tangibility, composition, access, utility, transaction ability, industry cycle, and regulation, however, both are very similar in relation to value, demand, supply, scarcity, rarity, and security.

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In terms of value, bitcoin, like gold is considered to be good storage of value due to its limited supply of 21,000,000 BTC. Since it has a limited supply, bitcoin is also volatile which causes its price to fluctuate. This feature is also what entices businessmen and crypto aficionados to invest in, sell, and buy bitcoin.

Another interesting feature about bitcoin is that like gold, this cryptocurrency is also acquired through mining. Gold is collected through hard-rock mining and bitcoin, on the other hand, is acquired through digital mining.

A brief introduction to Bitcoin mining

Bitcoin mining is the process where the individuals, who are also called miners, generate bitcoins with the use of dedicated software and powerful computers. These equipment are used to solve intensively difficult mathematical equations. Bitcoins are hidden inside data blocks and are mined with the use of a special algorithm designed by its anonymous creator, Satoshi Nakamoto.

The software used in mining can be downloaded for free. However, bitcoin mining is known to consume huge amounts of energy and storage space once the process is started. It makes use of nodes or powerful processors that drive the bitcoin software, which also helps in transmitting transaction information throughout the entire network.

Now that you have a basic understanding of what bitcoin mining is and how it works, we can now proceed to the uses of bitcoin.

Ways of using bitcoin

With the growing adoption of bitcoin, there is a great deal of how and where you can use it today. Before knowing these, you must first learn that bitcoin also has a decentralized system. Currently, it is considered the most open financial system where payments can be made 24/7 all across the world, without having to go through the thorough process of traditional banking systems.

Bitcoin’s blockchain will not operate without the said virtual currency. Its system can also fully operate without any regulators, middlemen, or government behind. This feature makes cash transactions possible through peer-to-peer marketplaces.

There is a great range of ways on how you can use bitcoins. Among these options are for online purchases and payments, investments, trading, development aid, and remittance.

Purchases and Payments

There are a lot of major companies and institutions that accept bitcoin as payment for their goods and services. You can go from car companies and dealerships, airlines, hotels, grocery stores, restaurants, universities and colleges, technology companies, banks, hospitals, theaters, and a lot more.

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Investments

This asset has a good feature of storing value like gold. Bitcoin and other cryptocurrencies experience extreme highs and lows that affect its price from time to time. Unlike traditional fiat currencies like dollar, euro, yen and others that can be reprinted by its respective central banks, bitcoin’s supply is only 21,000,000 BTC. Since it is considered a scarce and is highly volatile, bitcoin became even more interesting to businessmen, investors, and cryptocurrency enthusiasts.

Trading

This is so far the most popular way of using bitcoins along with other cryptocurrencies. There are more than 500 available cryptocurrency exchanges today and this number is expected to increase in the coming years. Some bitcoin holders engage in cryptocurrency trading where they buy, sell, and trade bitcoins through hundreds of payment methods, in thousands of cryptocurrency exchanges.

Charity undertakings

For those bitcoin holders who like to engage in social good and humanitarian acts, there are major non-profit organizations around the world that accept bitcoins and other cryptocurrencies as donations for their campaigns and missions. Included in the list are The Water Project, Watsi, Red Cross, Free Software Foundation, Humanity Road, and Save the Children.

Remittance

The traditional way of sending money, which is commonly done through banks and remittance service providers tend to have a tedious process which requires a lot of information. Transactions in banks and remittance service providers are usually charged with higher fees, which also vary on the receiver’s location and the amount intended to be sent.

Sending money with bitcoin and other virtual currencies, on the other hand, requires you less but gives you more. It also comes with least to no additional charges for transactions. Remittances done through virtual currencies are known to be faster, more cost-effective, and convenient.

Let the crypto engagement begin

Now that you have learned the basic information about bitcoin and how it works, you can then start with your cryptocurrency engagement. There are still a lot of things to know about this growing and ever-evolving innovation. Just be sure to crack the books and check out every little detail that you think might help you in your new involvement.

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