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What is a Bitcoin

Updated on January 4, 2016

Bitcoin is both a global digital currency and a payment system. It is the first truly decentralized digital currency and the largest of its kind in terms of overall market value. The bitcoin system was created and released for public usage around 2008/2009 by Satoshi Nakamoto (a currently unidentified person or group of people). The currency debuted around the time of the 2008 housing collapse/financial crisis. The point of bitcoin’s creation was and still is to take power away from the central bankers and governments who usually control the flow of all currencies.

If you want to limit the power of the wealthy, stop using their money.

Fictional version of physical Bitcoins.
Fictional version of physical Bitcoins.

Exchanging other currencies, products and services for Bitcoin?

Similar to our commonly accepted global currencies, bitcoin can be used to pay for goods, services, or to exchange for other currencies. More and more merchants are beginning to accept bitcoin for products and services. Bitcoin ATM’s are also beginning to spring up in major cities all over the world.

There are now many comprehensive, combination wallet/transaction services available that will allow you exchange other currencies for bitcoin using credit cards, debit cards, bank accounts, etc. and also perform transactions (send/receive bitcoin). One highly recommended combination wallet/transaction service is Coinbase.

If you prefer holding your bitcoins in a more private, wallet-only service, while having a different service for performing transactions, Bitcoin Core is the very best choice since it was actually also created by Satoshi Nakamoto (the currently unidentified person or persons who created the entire bitcoin system).

How are new Bitcoins created? What is Bitcoin mining?

The easiest way to understand bitcoin mining and how the overall bitcoin system works is to think of it all as a giant digital ledger. When someone uses bitcoin to pay someone else the transaction is recorded on the giant ledger. Numerous computers all over the world then compete with each other to confirm the transaction by solving high-level, complicated math equations. The winning computer/computer’s owner is then awarded newly created bitcoins. This process is called “bitcoin mining”.

Basically, new bitcoins are created and rewarded for payment processing work in which individuals all over the world offer their computing power to verify and record payments into the giant public bitcoin ledger. Bitcoin mining is the only way in which new bitcoins can be created (think of it as new money being printed).

Should you use Bitcoins? Should Bitcoins be used as an investment tool?

Bitcoin is currently a very volatile currency and completely uninsured (if you lose it, it's government/central bank policies exist to protect it). Nonetheless, its potential is exponential. It is unregulated, decentralized, not subject to any tax (unless you choose to declare any profits) and basically as private/anonymous as using cash.

There are several reasons that bitcoin is an excellent investment tool or simply an excellent currency to start using if you aren’t yet.

  • Overall, the value of a bitcoin has rose steadily since its release. One bitcoin started off at about $1, one bitcoin most recently was worth $400 (January 2016).
  • Bitcoin continues to increase in popularity. An consistently increasing number of merchants are actively accepting bitcoin. The more businesses and the more people who choose to use bitcoin, the more in-demand it will be.
  • Increased usage combined with the fact that there are a limited number of new bitcoins that can ultimately be created mean the value of one bitcoin will continue to rise. At the moment 25 bitcoins can be mined/created every 10 minutes. Starting in mid-2016, this number will lower to 12.5 bitcoins. The number of bitcoins that can be mined/created every 10 minutes will continue to decrease every 4 years. Ultimately, new bitcoins will stop being created around 2110-2140, when 21 million bitcoins are in existence.
  • The privacy provided by bitcoin is one of the best reasons to start using bitcoin/investing in bitcoin. Cash began taking a backseat to credit cards and debit cards a few decades ago. Nearly every one of our transactions is now tracked, monitored, often hit with a fee, etc. Bitcoin brings back the level of privacy our society once had with the constant usage of cash. When you perform a bitcoin transaction you simply use a unique string of numbers/letters to send and receive bitcoin. Your name, address, or really any identifying information at all is completely private.

Rise of Bitcoins, since their creation in 2009.
Rise of Bitcoins, since their creation in 2009.

It is the hope of many that digital currencies slowly and steadily overtake the usage of mainstream currencies, thus putting financial power back into the hands of individuals, on a global scale.

Bitcoin is the first, most widely used digital currency currently available. Mainstream currencies are obviously still widely used and very dependable, but every individual should take a moment to acquire a few bitcoins or at least educate themselves on bitcoin. Bitcoin has long been projected to become an increasingly commonplace and heavily used global currency in the next few decades.

© 2016 perpetuallysunny


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