Bitcoin is a form of digital money that tends to serve as a currency. Hence, it is known as digital currency or digital cash among the common people. Sometimes, it is also called as virtual or electronic currency or technically as cryptocurrency. Bitcoin cryptocurrency is thus a form of online digital money using encryption and encoding to make processing and transactions safe and secure. As with money, you can buy and sell with bitcoins or invest in them.
How is it different from physical money?
The transactions using bitcoins are completely done online and have preventive measures for hacking and getting stolen. This cryptocurrency works without a centralized bank or administration. It follows peer-to-peer network where the transactions are authenticated by nodes through a secure and safe communication.
The main idea was to come up with a currency, which is not under any government body, can be traded universally without extra cost and last but not the least, without disclosing your name or identification. Though bitcoins can be used just like normal money, they do not physically exist. They are only a certain number of instructions in the programming language or code.
History of Bitcoin
Bitcoin is supposed to be invented by an unknown person or a group of people going by the fictitious name of Satoshi Nakamoto. In 2008, Nakamoto revealed a white paper to the general public, with details of the new currency. Nobody knows anything more about this person.
How does the bitcoin cryptocurrency work?
Nakamoto further stated that this form of currency will use cryptographic authentication, which will allow the end parties to communicate with each other directly without any other medium in between. The answer to this is the use of blockchain, to keep a track of the amount transactions. The blockchain records transaction details with the help of users, along with their computational power. Then they are awarded with freshly minted Bitcoins and this is called as Bitcoin mining.
Obtaining the cryptocurrency
Bitcoin cryptocurrency can be acquired in the following ways:
- Accepting it as a mode of payment in exchange for products and resources.
- Buying it directly from the people or specific sites known as ‘exchanges’; these will exchange physical money with bitcoins.
Why bitcoins can become a threat?
- Bitcoin does not have a centralized bank and it is unregulated.
- The pundits fear that the value can crash (after Etherium crashed from $317 to $0.1 per coin in a single day).
- Financial experts state that investing in this cryptocurrency is equivalent to gambling.
- It is already a favorite for cyber crimes.
The road ahead for cryptocurrency
After the success of bitcoins, there emerged various copies of them called altcoins. These perform high-end functions using the computation power of blockchain. An altcoin by the name Etherium is communicative and accomplishes things like placing your money by making its own decisions.
Soon the invention of bitcoin cryptocurrency and similar altcoins can lead to an independent financial sector in the future whose reins will be held by machines, instead of humans. Isn’t this intimidating?