The financial world can be a confusing place full of strange terms, unusual forms of currency, and endless trading options. Unfortunately for those who are not so tech savvy, the integration of the internet into our daily lives has allowed the financial world to evolve. In addition to extensive banking, payment, and stock options that have become the norm online, there are also new currencies that have been created.
These cryptocurrencies, digital currencies with encryptions to maintain security and validity, feature a real value and can be exchanged for USD, GBP, or any other type of physical currency through online options.
The most popular type of virtual currency is known as Bitcoin and has steadily begun to rise in popularity and strength over the years. At first glance, Bitcoin may sound confusing, however below are ten facts that will truly explain in layman’s terms what exactly bitcoin is and how it came to be.
No one single entity controls this currency.
Confusing? Yeah most people think too so at first. The general concept of currency and money is that a bank controls it, that there are rises and falls in its value based on the global market, and that you can physically hold it. Bitcoin defies all of these. It is, in fact, controlled by everyone who uses bitcoin as the software used for this currency logs and validates who log and validates activities of the bitcoins across the globe.
There’s a finite number of bitcoins.
You would think that because there’s no need to physically print the bills or mint the coins that there could be an infinite number of bitcoins in existence; however that would devalue the currency and render it worthless. Instead, there are exactly 21,000,000 coins.
Bitcoins have no inherent or set value.
If you look at a dollar bill, you know that it is simply a piece of paper with a number on it and some fancy pictures saying that it is “worth” $1. It, in fact, only has value because we say it does. Bitcoins are the same way. Those little digital pieces of code are only worth money because people say they are and want to trade real goods/services for them. The more popular bitcoin gets, the more value is going to be placed on each individual bitcoin.
You can see all transactions.
The unique thing about Bitcoin is that it is completely transparent. Not with personal data, no, but instead with transactions and amounts. Everything is able to be seen on the block chain and it’s this complete openness that instills a lot of trust and security amongst the Bitcoin community.
You can mine bitcoins.
Mining bitcoins is a term that actually means you’re using a computer program to solve mathematical problems to verify various transactions around the world. Bitcoin miners then get paid a certain number of bitcoins for solving those problems.
You cannot reverse a transaction or be forced to pay.
One of the most integral features about bitcoins is that you can never be forced to pay, nor can you take back a transaction. If you send a company some bitcoins for a product, you cannot revoke that transaction nor can they repeat bill you and force money to be taken out.
You can send money with little to no fees.
If you want to send money to a friend in Thailand and you were in the United Kingdom, you’d likely have to pay bank transfer fees, currency conversion fees, and more. Additionally, your friend may have to wait a few days before the money is available. With bitcoins, there are little to no transaction fees and the money is available almost instantly!
Bitcoins are held in digital wallets.
Much like when you log into your online bank account and see your balance, you also have a bitcoin wallet that is established when you sign up. This wallet is like a physical wallet, but much more secure. If you lose it, it’s lost forever; however it’s impossible for people to take money from your wallet without you giving it to them. Additionally, if you know a bitcoin address you can see how many bitcoins they have.
Losing a wallet means those bitcoins are lost forever.
While the bitcoins in the wallet may still be in existence because they were recorded on the block chain, they are no longer able to be spent because the wallet is lost. These bitcoins have unique keys to them and so if they’re lost with a wallet, then they are essentially removed from circulation forever.
You can really buy things with bitcoins.
Bitcoins may sound a bit farcical at first, but it’s actually a real currency used to buy real things. There is a variety of merchants who accept bitcoins as payment for items, both online stores and physical stores. Popular online stores who accept bitcoins include Newegg, Overstock, Microsoft, Dell, and more. In person stores include Reeds Jewelers, One Shot Hotels, Holiday Inn (located in New York), and even local pizza places, restaurants, and more. You can even use bitcoin to fund a gambling addiction, buy gold bullion, or even to donate to a charity!