Bitcoin is a peer-to-peer, decentralized, middlemen-free payment system built using blockchain technology. Put simply, Bitcoin is a payment network where the value changes hands securely without any intermediary or central influence.
The native cryptocurrency of the Bitcoin blockchain is represented by the ticker symbol – BTC. It is called peer-to-peer cash.
According to CoinmarketCap charts, BTC is the most valued crypto coin in the world. Bitcoin (BTC) has a market dominance of around 62.49% and a market cap of 322.15 billion USD. Now you know why Bitcoin is on every other tongue.
Did you ask – What is Bitcoin? How to use Bitcoin? Where to buy bitcoin? How it went from innovation to carving a full-fledged financial ecosystem?
Well, tag along as we will answer all these questions in this post.
The Drawbacks of Traditional Financial Fabric
Before we dive into Bitcoin, let’s take a step back and look at traditional paper-coin currency (fiat currency). What we call ‘money’ represents value; we redeem this ‘value’ in exchange for a commodity or a service with similar value.
Fiat currencies are mostly controlled by governments- this means governments can monetize or demonetize fiat currencies at will. Also, banks and other central establishments largely influence the economy. The 2008 recession mirrored the shortcomings of the traditional financial infrastructure.
An anonymous person/entity named Satoshi Nakamoto was overwhelmed by the 2008 recession. The ill-effects of centralization in an economy fueled Satoshi Nakamoto to launch the decentralized currency – Bitcoin (BTC) in 2009.
What is Bitcoin?
Bitcoin is the first implementation of blockchain technology. It was the first-of-its-kind innovation that revolutionized the financial fabric by introducing cryptocurrencies.
Bitcoin is a peer-to-peer payment network that processes transactions on an immutable public ledger of transactions called a blockchain.
Unlike traditional establishments, Bitcoin doesn’t require intermediaries like banks. Instead, it is a peer-to-peer cash transfer system. The native cryptocurrency of the Bitcoin platform is BTC, the world’s largest cryptocurrency.
Bitcoin has witnessed a bullish trend in recent months; as of now, each BTC unit is worth $17,362.45 as per CoinMarketCap.
Bitcoin stands out as it exhibits the following properties –
Bitcoin is independent of any central authorities, be it banks or governments. The Bitcoin network is distributed across thousands of nodes (computers) worldwide. Each participating node stores a copy of the Bitcoin blockchain.
The transactions are stored in a set of blocks chained together using advanced encryption technology called cryptography. This makes it hard to fool the Bitcoin blockchain network as a hacker would have to tamper with thousands of linked blocks simultaneously. Also, as discussed earlier, instead of storing the data in a central server, Bitcoin transactions are stored across thousands of computers. This further makes the system largely immune to hacks.
Bitcoin transactions are pseudonymous, meaning no one can trace the identity of the recipient or the sender.
Unlike the traditional banking ecosystem, you don’t need to submit KYC or any other documents to participate in the Bitcoin network. However, some exchange platforms now require KYC papers.
To send or receive Bitcoins, you need a wallet address and a stable internet connection; that’s it.
Bitcoin is hard-capped at 21 million units, out of which over 18 million are in circulation. This hard cap ensures the value of Bitcoin will rise with demand.
How to Use Bitcoin?
The best part about Bitcoin is that it can be used as peer-to-peer cash or as an investment.
Here’s how you can buy, store, and spend Bitcoin.
Where to Buy Bitcoin?
You can buy Bitcoins at the following platforms –
- Exchange – Cryptocurrency exchange is similar to traditional stock exchanges where you buy Bitcoins based on the market price.
- Brokerage – Brokerage platforms popularly called ‘Over-the-Counter Market (OTC)’ match buyers and sellers for a trade. These platforms act as an intermediary between the two parties.
- Peer-to-Peer (P2P) Platform – As the name suggests, P2P platforms involve direct contact between the buyers and sellers. The sellers push their ask price while buyers choose the most promising bid. P2P setting is amongst the safest options to buy Bitcoins.
- ATMs – You can also buy Bitcoins from 11,497 Bitcoin ATMs worldwide if you are comfortable paying high transaction fees (7-12%). To purchase Bitcoins from an ATM, you enter your wallet address and feed the ATM with the accepted fiat currency. The BTC units will reach your wallet within 30 minutes.
Where to Store Bitcoin?
Well, Bitcoin isn’t a physical currency that you keep in your pocket. So, what are we storing?
When we talk about cryptocurrencies like Bitcoin, private keys give us access to our funds and public keys to receive funds. Think of them like your bank password and bank account number, respectively.
You need to store your private keys in a secure environment to protect your funds from evil eyes, as losing private access would mean losing your Bitcoin holdings. For this purpose, you need to store your private keys in a wallet.
There are two types of wallets – a) Hot wallets and b) Cold wallets. If you want to store Bitcoins for day-to-day trading, you should choose hot wallets. However, large BTC holdings must be stored in cold wallets.
Where to Spend Bitcoins?
You can use your BTC holdings for several purposes, from buying household items, gift cards, food to paying for travel, booking hotels, and whatnot. Many small vendors and also behemoths like Microsoft accept Bitcoins. Yes, you heard that right; you can buy Xbox store credits in exchange for a certain amount of Bitcoin. Companies like Wikipedia, AT&T, Subway, among others, also accept Bitcoins.
Well, Bitcoin is also a store of value for many. You can invest in Bitcoins to earn lucrative returns. Nevertheless, Bitcoin is a volatile asset, and thus, you should do your research before investing in Bitcoins.
The fact that Bitcoin is dominating the crypto space since its launch indicates that Bitcoin is here to stay. Also, with companies like Square holding Bitcoin in their reserves, Bitcoin asserts its importance very strongly. The bullish trend of BTC in recent months further reflects the strong position of Bitcoin.
Moreover, in October 2020, PayPal announced that it would allow users to purchase, sell, and hold cryptocurrencies. This advancement is a significant positive for cryptocurrencies like Bitcoin.
Well, no crystal ball can predict the future of Bitcoin. However, considering all these factors, it would be wise to bet on a bright future for Bitcoin.