What are bitcoins?
Bitcoin (capitalised) refers to the software or network (ie: the Bitcoin Network), while bitcoin (not capitalised) refers to the digital currency itself (ie: two bitcoins).
The price fluctuates, depending on what people were willing to pay for it. It traded for as low as pennies (during the infancy stage) to as high as USD1200 during its peak in 2013
Who developed the idea of bitcoins?
The idea of Bitcoin was conceptualised by Satoshi Nakamoto, an anonymous figure. In May 2008, he shared a white paper [PDF] about Bitcoin, a peer-to-peer cryptocurrency.
Without disclosing who he was, Satoshi outlined how the currency would work: bitcoins would be ‘mined’ by computer software, transferred directly amongst users and recorded in an untamperable ledger without the need of a third party.
Then he disappeared.
Part of Bitcoin’s appeal is Satoshi Nakamoto’s anonymity, who many view as a selfless act towards a new era of financial revolution. Online detectives have identified a few candidates, including a real-life Japanese person sharing the same name. Some even theorised that Satoshi Nakamoto is a pseudonym for a collective.
In May 2016, the Bitcoin community was shocked when Australian entrepreneur Craig Wright identified himself as Satoshi Nakamoto. Some people believe his claim, some didn’t, but on the whole the Bitcoin community is unaffected – the Bitcoin ecosystem is decentralised, and cannot be controlled by any person(s), including the creator.
What is so special about bitcoin?
Bitcoin is a peer-to-peer currency and runs on a system which allows you to send and receive bitcoins without a third party.
To put simply, fiat currencies rely on third parties, such as banks or payment processors like Visa, to verify the transaction. This is how you and I can ensure payment sent was indeed received.
However, bitcoin transactions are recorded in a public ledger called the bitcoin blockchain. This information are permanent and publicly viewable on Blockchain.info and cannot be edited or deleted.
This means that the transaction records act as proof of transaction. Bitcoin is also programmed to be non-duplicable, which means double spending is highly unlikely.
What is decentralised currency?
Bitcoin is also a decentralised currency, as in no one government, individual or group holds authority over it. This makes bitcoin spendable anywhere in the world as long as the receiver accepts bitcoins as payment.
Decentralised currencies are a unique concept. Similar to the internet, it is free from geographical boundaries – this is why bitcoin is also dubbed ‘the currency of the internet’.
Due to lack of control and regulations, many countries are understandably wary of bitcoin – and other cryptocurrencies in general – but some progressive countries such as Japan have started to recognise it as currency.
Is bitcoin anonymous?
Bitcoin’s anonymity is a myth. Or rather, it is now much harder to make anonymous transactions with Bitcoin. Because as the ecosystem matures, many bitcoin service providers have started implementing KYC/AML regulations.
KYC/AML stands for know your customers/anti-money laundering . This requires users to submit proof of identity and proof of residence.
It is also fairly easy to trace bitcoins. Bitcoins are usually bought from bitcoin exchanges, received as payment, or donated. With transaction details publicly viewable online, it is possible to trace where the bitcoin came from.
*** How do you use bitcoins?***
Bitcoin can be used for spending, similar to money. Some people also keep them for investment purposes, while others prefer to use them as a method to make international money transfer.
Bitcoin exists electronically and is kept in ‘bitcoin wallets’. There are many types of bitcoin wallets: desktop wallet, mobile wallet, online/web-based wallet, hardware wallet and even paper wallet.
To read more about bitcoin storage, check out this article by CoinDesk. You can have as many wallets and bitcoin addresses (where you receive money from others) as you like.
*** How many people are using bitcoin?***
Estimates vary – it is hard to find out the exact number of people who use Bitcoin. One way to measure number of bitcoin users is by measuring the number of bitcoin wallets.
According to CoinDesk’s State of Bitcoin and Blockchain 2016 report, bitcoin wallets doubled to 12.77 million in one year, from the end of 2014 to the end of 2015. Even though many bitcoin users have more than one wallet (it is common to hold a few wallets), this is an indication that the number of bitcoin users worldwide is increasing.
Another way to estimate bitcoin usage is by the number of bitcoin transactions, which has steadily increased. Although this could mean that the same people are simply making more bitcoin transactions, it is fair to assume that there are new bitcoin users in the mix, too.
How do I acquire bitcoins?
Bitcoin Mining
Bitcoin mining used to be really profitable. However at the current time it is no longer cost effective for the average individual. One will need to buy specialised Bitcoin mining equipment, get/rent dedicated spaces for them, and pay their associated costs (rental, electricity and cooling costs).
Buy Bitcoins
You can buy bitcoins from many online exchanges. There are a lot more options now than ever before – there are global bitcoin exchanges and also country-specific bitcoin exchanges. You can also buy them from other people via Localbitcoins.
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