Understanding Bitcoins and Their Advantages Over Regular Currencies
Bitcoin is a digital currency that is created as well as stored electronically. Unlike dollars or euros, they are not controlled by any party. 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. You know that if you put a dollar in the bank, you will get some gold in return, although is purely theoretical. However, bitcoins are based on mathematics and not on precious metals. Everywhere in the world, people are using software solutions that work around a mathematical formula as a way to produce bitcoins. Since the mathematical formula is available to all, anyone can check it. The software itself is open source, indicating that everyone can do their part in ensuring that it does what it should.
Advantages over Conventional 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. But there are several advantages offered by bitcoins, including:
There is no such thing as central authority when it comes to the bitcoin network. Each bitcoin-mining machine that processes transactions is part of the network, and all machines work together. Therefore, in theory, no central authority can interfere with monetary policy and trigger a meltdown – or just decide to snatch bitcoins from their owners. And in case a part of the network goes offline for any reason, the money will continue to flow.
Conventional banks can have tons of requirements, sometimes even unnecessary ones, just to open a simple account with them. Setting up a merchant account is just another task complicated by bureaucracy. In contrast, a bitcoin address can be set up in seconds, with zero fees and zero questions at that.
Bitcoin accounts are anonymous – kind 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. However, the bitcoin network will keep all the details of each transaction you have made in a giant electronic ledger called the blockchain. The blockchain knows everything. If you use your bitcoin address publicly, everyone can tell how many bitcoins that address holds. 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
Transaction fees using bitcoins are minuscule in comparison to what banks charge for international transfers.
Speed and Non-Repudiability
Using bitcoins, you will be able to send money anywhere in a matter of minutes. Finally, it’s non-repudiable. The moment your bitcoins are sent, there’s no recovering them, unless the recipient sends them back to you.