The advancement of technology has resulted in many changes in the economy. One of the areas that have revolutionized is the currency system. We now have a digital currency which is popularly known as a cryptocurrency. This is the type of money that exists in the virtual space. Nobody can claim ownership over it. One popular example of cryptocurrency in Bitcoin. Unlike the traditional currency which is tangible and easily regulated, Bitcoins are opposite. They operate as a separate entity without any form of interference from government or other organizations.
What are Bitcoins
Bitcoins are electronic currencies and can also be referred to as cyber currency. They are a form of digital currencies that are created through complex mathematical computations. The computation is done under close supervision of millions of computer users known as miners.
Bitcoins flow freely without any level of control. Nobody can track the behavior of this currency nor track the history of the transactions that one has made. They are also independent of the existing economic conditions. Their value is not affected by cases of inflation and deflation.
History of Bitcoins
Bitcoin came into existence in the year 2008 and was invented by Satoshi Nakamoto. He brought it into the public domain after publishing a white paper named “Bitcoin: A Peer to Peer Electronic Cash System.” The paper mainly gave a detailed description of the first version of Bitcoin was released in 2009. Later on, Satoshi made a transaction with a cryptographic guru, Hal Finney.
In 2009, the exchange rate of Bitcoin was 1,309.03 BTC = US$1. The values were reached upon after taking into consideration key factors that were used to generate the bitcoins. The main factor was the cost of electricity that used to run the computer. Since its inception, Bitcoins journey into the financial mainstream has been unstoppable. Although it used to face some level of resistance, key players in the financial world are now embracing it.
How Bitcoins work
Since bitcoins operate in a virtual world, there are no central banks that store your coins. However, owning the can be compared to having physical gold coins. You can use the coins to pay for good and services on online stores. You also have an option of keeping the bitcoins for future use. Maybe you can store them as you wait for their value to rise.
The transactions of bitcoins take place from one digital wallet to another. This wallet is a personal database that exists on your computer, smartphone, and tablet. The wallet can also be stored in the cloud so that you can access it from a remote location.
After you have installed a Bitcoin wallet on your device, the wallet will generate your first Bitcoin address. You also have an option of creating other addresses. You can then send you to address to other people such as friends and then request the same from them. All the transactions are conducted through these addresses. However, it’s important to note that these addresses can only be used once. This feature enhances the security of the currency system and makes it difficult for third parties to steal the data or monitor the nature of the transaction.
The bitcoin network relies on a system known as blockchain. This is a shared public ledger that proves all the successful transactions. It enables Bitcoin wallets to calculate their balances and also verify new transactions. Since all the bitcoin transactions take place between wallets, there must be a way in which the system proves the occurrence of the transaction. This feature is enabled by a small piece of information known as the Private Key. The key signs each transaction and provides a reliable proof the transaction was executed by the owner of the wallet.
Another key role of the private key is to prevent the transaction from being changed or tampered with once it has been completed. The transactions taking place between users are usually confirmed by the cryptocurrency network after ten minutes.
The cost of Bitcoins in dollars
According to the data from Coinbase.com, the value of bitcoin has been on a steady rise over the years. Currently, the value of 1 Bitcoin equals 3153.73 US Dollar. One reason for the surge is the warm reception that it has received from different quarters. Various governments are now recognizing it as a legal form of payment. A good number of major retailers are also accepting Bitcoin in paying for some goods.
Things you can buy with bitcoins and where Bitcoin is accepted:
Giant retailers such as Amazon, CVS and the Home Depot are now incorporating cryptocurrency as a form of paying for goods and services. Due to the nature of Bitcoin, most of these retailers are online stores.However, some of the traditional shops are also embracing it. This is in contrary to the past where they were viewed from a negative perspective. In addition to tangible goods, you can also pay for some services such as air tickets and obtain discounts from various stores. Some of the major online stores that accept Bitcoin include Microsoft, Dell, Overstock, and TigerDirect. The mentioned stores deal with computer hardware devices.
Some airlines have also embraced this form of currency. Travelers can pay for air ticket using this type of currency. Such airlines include Air Lituanica and AirBaltic. There are also some travels booking companies that have embraced the use of cryptocurrency.
Steps of how to buy your first Bitcoin
1. Set up your Bitcoin wallet. The first step is to set up a cryptocurrency wallet. This is achieved by simply downloading it as mobile application or software on your computer. You can also set up a cloud wallet.
2. Decide on where to buy the currency: You can buy your first Bitcoin. Some sellers can offer to sell the Bitcoin directly in exchange for cash or credit card. Most users prefer to buy Bitcoin from coinbase.com. This website and the mobile app requires you to set up an account then add your preferred form of payment, whether it is credit or debit card. You can also search for reliable sellers before completing the transaction.
3. Once you have bought the coins, you will be required to transfer them into your wallet. The step simply involves giving the seller your Bitcoin address. The coins should be in your account after some minutes. It all depends on the speed of the seller.
Since you are a beginner, it is always advisable to start with a low value of coins. You will be able to master the tricks of the cryptocurrency as time goes by. It is no doubt that crypto currency is evolving to be a major currency, the earlier you embrace it, the better.