“[Bitcoin] is a techno tour de force.” – Bill Gates, Founder of Microsoft
Whether you love or hate it, or even know anything about it, experts from all sides agree it will change how we use and look at money. It is the new hot topic to talk about it. Everyone has an opinion about it, whether they understand it or not. Impress your friends and blow people with knowledge of the most innovative and conversational technology since the internet by learning what makes Bitcoin, Bitcoin.
When You Say Bitcoin, You Mean What Exactly?
Bitcoin is most often regarded as a currency but it is a label that covers many things, such as protocol, payment network, distributed technology, etc. This is confusing and makes trying to get started learning about Bitcoin, overwhelming, but hold on, because this article will help you understand. To get started, Bitcoin is an assortment of components and those components are the blockchain, bitcoins(currency), and a payment network. Bitcoin, the currency, is the frontman of these three but all of them are equally valuable and needed for the currency to exist.
“Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value” – Eric Schmidt, CEO of Google
Bitcoins are a unit of electronic currency, stored and transferred on the blockchain, which is a ledger that records all transactions that happen on it. Bitcoin is a currency first of its kind. Never before were you able to have electronic or digital currency, that could have a fixed maximum amount and have no third party involved. The problem, in the past, with bringing money to the age of the internet, is something virtual is so easy to copy. Currently, a large portion of the existing financial system is digital, but the system is prone to problems and high costs because of the third parties such as banks or payment processors involved. Bitcoin, using an advanced computer science called cryptography, is able to get around this problem to make sure no one can duplicate it.
Bitcoin has done to money what email did to mail. Bitcoin has drastically taken down barriers to getting financial services and using a secure, appreciating currency. Bitcoin does money, but cheaper and more efficient. It also allows you to interact with the global economy without major obstacles. It has not simply improved on what previous money has done, but is capable of things that regular money has never imagined. It is able to be both, scarce, like gold, but useable as currency, like paper money. It also allows tiny payments that are simply not possible with the existing banking system. Most amazing of all, it allows people who don’t know or trust each other, do business with each other (more on this later..). Whether it is a Iranian shoemaker selling his hand crafted shoes to a businessman in New York, or a company in Argentina hiring a freelance graphic designer in the Philippines. It is a truly revolutionary technology.
The Payment Network
“[Virtual Currencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” -Ben Bernanke, Chairman of the Federal Reserve USA
The payment network of Bitcoin gets very little praise but it is one of the most amazing parts of the technology. Unlike other currencies, bitcoin comes with its own way to transfer itself, and they do it, cheaper and efficiently. Companies like Paypal process transactions at fee of 1 to 5%, but bitcoin can do it for pennies – a truly amazing feat. Bitcoin is much more efficient in other ways as well. Bitcoin doesn’t involve trust, as the traditional system does. There is no chargebacks in the bitcoin system, and thus there is no risk of fraud for the merchant. Merchants suffer from a heavy amount of fraud because of the risk involved with using credit cards and other legacy payment methods. As an example,take a Bitcoin only online electronic store, called CoinsForTech. in a reddit post by their CEO, they revealed they have already sold $300,000USD of electronics to customers across nearly 40 different countries in the first 9 months of its business and are on target to break $500,000 for their first year. The majority of these sales have come from risky countries, that the traditional system, like Paypal, has neglected. The CEO explained that countries like India, Israel and Pakistan are some of their best customers. The reason they can transact in these countries are that are considered financially risky, is because they know when the transaction is completed, it is done. There is no way for customer to take their money back, like they can with credit cards, other than a refund initiated by the merchant itself. Many people in these countries use chargebacks as a way to get the product and keep their money. Chargebacks involve a lengthy and complicated process which costs large amount of time and money.
Bitcoin’s payment network has also helped the less fortunate. Wired did a story about a homeless man who lives off bitcoin. He was able to find odd jobs online and get paid in bitcoin. He also buys food and other things with bitcoin. Getting a bank account for a homeless person is very difficult, if not impossible, but bitcoin allows him to use financial services, like way to sending, receiving money, and storing money.
Bitcoin has also helped the less fortunate in other ways. Bitcoin’s payment network is incredibly cheap and efficient. You can send $1,000,000 or $0.20 for pennies. As a result, it allows poorer people to receive money and more of it goes to them, compared to traditional financial system. For them a 1% or 3% is a huge loss. This also allows charities, like the bitcoin only homeless shelter, Sean’s OutPost, to get more money out of the donation they receive. Since bitcoin transactions only cost pennies, when someone sends $100 of bitcoin, Sean’s Outpost gets $99.98. Even more important than that, is these low transactions fees allow people to send $1 and Sean’s Outpost will receive $0.98. These allows a whole new class of donations, called micro-transactions, to be possible. If you sent a charity a $1 through a traditional avenue like, Paypal, they would only receive $0.25 to $0.50 of that dollar! Making it not worth to send such small amounts.
“We have elected to put our money and faith in a mathematical framework that is free of politics and human error.” -Tyler Winklevoss, Entrepreneur
The blockchain is an amazing technological innovation that goes well beyond money. Never before have you been able to have a network of people who interact but don’t need to trust or know each other without a third party. In the past, these things would automatically lead to ample amounts of fraud. For example, the blockchain is the core of bitcoin, and it keeps track of who owns what bitcoins, and where the bitcoins are being sent. It also prevents things like counterfeiting or using double spending, which is using the same bitcoin to buy two things at the same time. The blockchain records all transactions, since the first transaction ever. It is available for anyone to see, and is the ledger allows the sender, receiver, and the public to all see the transaction has be sent. The record or ledger can never be corrupted or destroyed, as there are copies of it on computers all over the world. The most impressive part of it all, it does this all automatically without any human interference.
There are so many uses for the blockchain other than money. People are looking to use it for meditating and recording contracts, such as debt, and employment. Overstock has recently partnered up with crypto-currency developers, Counterparty, to launch a decentralized stock exchange based on Bitcoin’s blockchain. They hope that this new stock exchange will cut down on the corruption, they see prevalent in Wall Street.
How To Use It And For What?
While still very early days, bitcoins are being used more and more. A newlywed couple spent 3 months living and traveling around the world, only using bitcoin! The process of buying and using bitcoins is also easier than it’s ever been. Here is what you need to know about using bitcoin.
Think of a bitcoin wallet, just like your regular wallet – it stores and manages your bitcoins. There are many options for wallets, but Blockchain.info’s is the most widely used wallet, which you can get here.
Bitcoin address work just like how your home address does for packages shipped to you. If someone wants to send you bitcoins, they will need your address, so they have a place to send to. You can post your address on your blog, or social media profiles and people will be able to send you bitcoins. A bitcoin address looks like this, 1685NaM5x79MS4EiPQj2H6c3ACxWumRdb8.
Bitcoin exchanges are one of the most popular ways to buy and sell bitcoin. Getting signed up is easy and simple. The most popular exchanges are Coinbase, and Circle. Both exchanges are insured against hacks or lost of bitcoins and are regulated by the American government.
Be A Part Of The Future
Bitcoin is divisible to the 8th decimal place, meaning you can buy as little as one penny worth (or less). Buying bitcoin, even a tiny amount, and using it, is the best way to get familiar and knowledgeable about this breakthrough technology. Don’t miss out on the opportunity of lifetime to be part of history and use the money of the future!