Bitcoin is a new currency that exists only on the Internet. Unlike traditional currencies, it is not controlled by a bank or backed by the government. When you use Bitcoin, you are in full control of your money, there are no transaction fees, and merchants don’t have to worry about chargebacks.
Five Things You Need to Know:
1. Bitcoin is Not Restricted to a Country
In short, Bitcoin is immune to Government mistakes.
You can send Bitcoin to people in another country without having to go through banks or clearing houses. You don’t have to worry about government policies preventing money from leaving a country. And more importantly, you can send money accross borders instantly.
A government’s economic policies cannot inflate the currency. As a result, economists tend to call the currency a “deflationary” currency. Unlike traditional currency, things will cost less in Bitcoin over time, not more. When you hold USD, you are incentivized to invest in stocks to combat the forces of inflation. In a perfect economy, inflation should not happen.
With Bitcoin, Hyperinflation will never happen. Insane debt ceilings will not happen. Virtually all of the problems with the modern financial system are solved.
2. Merchants Save Money Due to Extremely Low Transaction Fees
Since no bank or money transfer agency is needed to send somebody Bitcoin, there are no transaction fees. As a merchant, this means that you can save 2-3% on every transaction as you no longer have to pay a credit card company or a bank. You can learn more about these benefits by watching this video.
As a side note, Bitcoin transactions are irreversible. Merchants don’t have to worry about charge-backs or disputes. Disputes is one of the open problems, and Bitcoin completely solves that.
3. Bitcoin is Safe & Anonymous
Bitcoin is an anonymous currency, but that’s what makes it great. It works just like cash. Fortunately, there are fantastic identity verification services that specialize in Bitcoin transactions. One example is Blockscore, an Identity Verification company that let’s merchants keep up compliance.
Unlike money that is stored in a bank, your funds cannot be frozen. When Bitcoin is in your possession, it is mathematically impossible for a third party to take it from you. This is one of the reasons that Bitcoin identity verification is important for new merchants. Once a company releases Bitcoin to a user, they can never get it back.
4. Bitcoins are generated by mining
Bitcoins come into existence by computers searching for random hashes, which are basically long passwords. Computers try different combinations of hashes until a Bitcoin is solved. Once a bitcoin is solved, it is now owned by you and can be traded on the open market or used to buy things with.
The ongoing, steady addition of new coins is similar to to gold miners expending resources to add new gold into circulation. In the case of Bitcoin, it is processing power and electricity that is expended, not human resources.
Mining is not as profitable as it once was, since more and more people are actively trying. That being said, there are special miners that can still generate Bitcoin rather quickly. It is not advisable to use your home computer to try to mine Bitcoin, it is likely just a waste of computing power and electricity.
This is Only an Overview
Bitcoin is a complex, distributed system. The math and cryptography behind the system are extremely complex. You can read the original paper, published by the anonymous Satosi here.
There are other cryptocurrencies, but none that match the adoption or benefits of Bitcoin.
If you are a merchant looking to expand into Bitcoin, or a consumer looking to invest in the crypotocurrency, you are making an excellent choice.
- License: Creative Commons image source
This article was written by Roy Swingle – Roy is an advocate for cryptocurrency and a strong believer in Bitcoin. He believes that Bitcoin knowledge should be stronger, so adoption will be faster.