Understanding Bitcoins and Their Advantages Over Regular Currencies
Bitcoin is a type of digital currency that made and held electronically. In contrast to dollars or euros, they are not under any party’s control. They aren’t printed on paper, but instead produced by individuals and businesses using a computer program that tackles mathematical problems.
Bitcoins and Cryptocurrencies
Bitcoin are the first in a developing category of money we call cryptocurrency. Traditional currency is based on gold or silver. Theoretically, you know that by handing over a dollar at the bank, you will get some gold in exchange (although this isn’t actually happening). Bitcoins, however, are based on mathematics instead of precious metals. Everywhere in the world, people are using software solutions that work around a mathematical formula as a way to produce bitcoins. This mathematical formula available to everyone, which means anyone can actually check it. Even the software is open source, which means everybody can pitch in to make sure that it does what it should.
Advantages over Traditional Currencies
Bitcoins can be used for making purchases electronically. In such a sense, it’s like traditional currencies, which can also traded through this route. However, there are many advantages of bitcoins, including:
There is no such thing as central authority when it comes to the bitcoin network. Each machine that mines bitcoins and processes transactions is a part of the network, and the machines all work together. Hence, theoretically speaking, no central authority will be able to change or interfere with monetary policy and start a meltdown – or simply decide to seize bitcoins from their owners. And even if a certain part of the network goes offline for whatever reason, the money will remain flowing.
Conventional banks can have tons of requirements, sometimes even unnecessary ones, just to open a simple account with them. Opening a merchant account is just another tedious task made complicated by bureaucracy. In contrast, a bitcoin address can be set up in seconds, with zero fees and zero questions at that.
There is anonymity with bitcoin accounts – or sort of. You can have a lot of bitcoin addresses, and not one will be linked to your name, address or any other piece of information that could be traced to you. The bitcoin network, however, stores all details of each and every transaction you make in a massive digital ledger referred to as the blockchain. The blockchain reveals everything. If your set your bitcoin address to public, anyone can see how many bitcoins there are at that address. But they’ll have no idea it’s yours. There are a lot of things you can do to maintain your anonymity on the bitcoin network, like varying the bitcoin addresses you use and avoiding putting too many bitcoins into a single address.
Small International Transfer Costs
Compared to the huge transaction fees banks collect for international transfers, bitcoin fees are minuscule.
Speed and Non-Repudiability
Using bitcoins, you will be able to send money anywhere in a matter of minutes. Finally, it’s non-repudiable. After your bitcoins are sent, you can’t get them back, unless the recipient sends them back them to you.