Bitcoins have become a buzzword in the digital space. News agencies have picked up its quick rise over the past 5 years and have become a “thing” people like to throw around when talking about the internet and financial transactions. But do they really know what it is? Here’s top 8 essential facts to know about Bitcoins.
Bitcoin is a digital currency, created and held electronically
It is essentially like conventional money (e.g. Philippine Peso, US Dollar) that you can buy things with and even trade. The only difference is instead of making use of printed money, all transactions are made digitally.
No one controls Bitcoins
Bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network. This means large banks can’t control people’s money. Every machine that mines bitcoin and processes transactions makes up a part of the network (more on that later), and the machines work together. In theory, one central authority can’t tinker with monetary policy and cause a meltdown – or simply decide to take people’s bitcoins away from them. And if some part of the network goes offline for some reason, the money keeps on flowing.
Bitcoins isn’t the only one of its kind
Bitcoins are produced by people
This currency does not have to be printed to have value nor does it depend on a central bank, bitcoins are created digitally by a community of people. Anyone can join. So long as they can ‘mine’ bitcoins using computing power in a distributed network.
The distributed network also process transactions with virtual currency, thus, making bitcoins its own payment network.
Bitcoins are limited
Based on the bitcoin protocol (or the rules that make bitcoin work), there are 21 million bitcoins that can ever be created by miners. However, these coins can be divided into smaller parts. The smallest being ‘Satoshi’ after its creator, Satoshi Nakamoto, and it is one hundred millionth of a bitcoin.
Bitcoins are based on mathematics
Unlike conventional currency where it has been based on gold or silver, bitcoins are based on mathematics. There are people all around the world who are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is free for anyone to see.
The software is also open source, hence, anyone can check if it’s doing what it’s supposed to.
It is easy to set up and transactions are fast
Without the complexities of policy and governing bureaucracy, setting up a bitcoin address in seconds, no questions asked, and with no fees payable. Aside from the ease of set up, you can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.
Bitcoins are anonymous and transparent
The only identification of what bitcoin ‘account’ is yours is the bitcoin address. No other identification (such as name, date of birth, residential address) is linked to your address. But, all bitcoin transactions are stored in a huge general ledger called the ‘blockchain.’ So this means that if you have bitcoin transactions, anyone can see your transaction and your total bitcoin stored in that address. But they don’t know the address is yours.
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