What is Bitcoin (BTC) – An Overview?
Bitcoin is the first digital currency. It can be electronically created or mined, collected, or sold for hard currency (cash). Just like stocks, Bitcoin has a ticket, namely BTC. Unlike stocks, Bitcoin is decentralized; therefore, not controlled by a single party, government, or centralized bank. Anyone can buy, sell, trade, or gift bitcoin to any other individuals using a cryptocurrency exchange.
All you need is to create a bitcoin wallet through one of the 100s of Bitcoin & cryptocurrency exchanges, fund your wallet or account using PayPal, credit cards, check cards, bank account, or even cash. Every coin is calculated and stored digitally by owners worldwide.
Bitcoin is one of the 100s of cryptocurrencies currently circulating. However, it was the first and, therefore, most popular. Below are more details about bitcoin: Who created it & why, its most valuable features & characteristics, and what makes Bitcoin different from hard currency like the U.S. Dollar, Euro, Yens, Pounds, etc.
Who Created/Invented Bitcoin?
Who created or invented Bitcoin is still a mystery to us all, except for the man or woman who created it him or herself. Allegedly, a software developer named Satoshi Nakamoto created bitcoin in 2009. He allegedly created a living document called a white paper, published it to the tech community in 2010, released the codes for Bitcoin, then disappeared without a trace!
The central claim is that Nakamoto was a victim of the 2008 bank and housing crisis. As a result, he wanted to create a financial system that can be run independently; out of reach of big banks, financial institutions, and governments. A very low cost, non-physical currency that can be transmitted, traded, exchanged, accepted, and received as a payment method quickly, securely, and even anonymously.
What is Bitcoin Backed By?
Traditional currencies like the dollar, pound, euro, and yen are backed by gold, silver, and oil reserves. Any of these conventional currencies or notes can be exchanged for goods, services, gold, silver, other commodities, deposited, or withdrawn at any bank worldwide. Bitcoin, conversely, is backed by algorithms and mathematics.
In other words, BTC is backed by nothing, zip, nada! Bitcoin can be generated or mined using ‘open-source’ software that uses a mathematical formula. Anyone with a computer can mine Bitcoins, but solving the algorithms and formulas are not that easy!
The anonymous feature of Bitcoin opens the floodgates for scammers, money laundering, and criminals because it makes it difficult to attach a bitcoin wallet address (add link to what is a bitcoin wallet address link) to a specific individual or company. The main technology that powers Bitcoin is called the ‘blockchain.’
While individuals focus on Bitcoin and other cryptocurrencies, companies and institutions like Microsoft, Amazon, Facebook, and the Federal Reserves put their focus and energy on the blockchain. The consensus is that the blockchain will power everything from airplanes to cell phones in the near future.
What are Bitcoin’s main features & characteristics?
The Bitcoin network has many unique features that separate it from other networks and currencies. For example:
1. Bitcoin is not owned or regulated by a single user, institution, government, or the bank
No single entity can lay claim on Bitcoin because the founder created it as a decentralized virtual currency. Unlike the U.S. dollar, euro, pounds, yen, and other hard currencies, Bitcoin is not physical and can be mined by anyone, anywhere. Governments, banks, and financial institutions around the world are afraid of Bitcoin.
Many countries tried to regulate Bitcoin but failed. The United States, particularly, will have a hard time regulating Bitcoin under its current legal system. The constitution will have to change, removing the First Amendment entirely before they can lay a finger on Bitcoin.
2. Bitcoin is completely decentralized
Bitcoin is a distributed ledger system that is maintained by a network of peers. These networks of peers monitor and regulate which entries are allocated to which Bitcoin addresses. These characteristics make Bitcoin impossible to be controlled or taken over by a single person, government, institution, or bank.
3. Bitcoin transaction is lightning fast and easy to process
Banks and financial institutions make it very difficult to open a personal or business account. Try to open a bank account in London, England as a U.S. citizen… that’s impossible. In addition to the exorbitant fees, it can take days for a cross-country transaction to reach an individual or bank account. The company Swift, who processes ALL international transactions, is using a system that was designed in the 70s.
The system is old and painfully slow. Millions of transactions are pending on Swift’s system on a daily basis. Bitcoin removes all the bureaucratic hurdles. You can create a bitcoin account, fund it, and send bitcoin to anyone, anywhere in minutes.
4. Bitcoin transactions are anonymous
Any person can create multiple Bitcoin wallets with multiple BTC addresses and wallets. Why is that? Well, no personal information is attached to the Bitcoin wallets or addresses. Bitcoin is anonymous, remember?
5. Bitcoin cannot be traced or hacked
Bitcoin was initially conceived by ‘Satoshi Nakamoto’ as a means for individuals to exchange money virtually and anonymously. As a result, no personal information like name, social security number, email, house address, or date of birth is attached to Bitcoin wallets and addresses.
Money is transmitted in the form of digital bitcoins from a public key to another public key. Bitcoin held in any wallet belong to any address that cannot be traced.
Those characteristics and facts, therefore, make Bitcoin nearly impossible to hack. A user’s exchange account, however, can be hacked and Bitcoin can be transferred to another user’s account without a trace.
Most cryptocurrency exchanges offer users a host of security measures (some required, others optional) to secure their accounts. Users’ negligence can result in hacked accounts and stolen Bitcoins and other cryptocurrencies.
6. Bitcoin transactions are transparent
Every single Bitcoin transaction is stored by the Bitcoin network in a large registry known as the Blockchain. The Blockchain is the owner and master of every transaction. It holds no secrets.
Every Bitcoin address on the Blockchain is available to the public, and whatever amount of Bitcoin or altcoins an address hold can be viewed online by anyone. But you will never know who owns the address.
7. Bitcoin transactions cost way less than conventional bank transactions
Bank transactions, ranging from $3 to $45 per transaction can be extremely expensive. If you’re sending money to relatives or outsourcing companies overseas, banks will force you to pay 100s, sometimes 1000s of dollars. With Bitcoin, you will be less than 10% of fees from traditional banks.
How many Bitcoins are in circulation?
The Bitcoin protocol was developed to house a maximum total of 21 million Bitcoins. As of the date this article was published, there are 17.68 million bitcoins in circulation. The remaining amount will be mined over time by Bitcoin miners. Once the cap of 25 million is reached, mining stops.
The demand for Bitcoin will drastically increase because there will not be enough to go round. Mined Bitcoins are divided into small parts, with the smallest being hundred millionth and is called ‘Satoshi,’ named after its creator.
Can I Buy a Fraction, Piece, or Part of a Bitcoin?
One big misconception about Bitcoin is that you have to buy a whole Bitcoin. That is NOT true at all. Anyone can buy a fraction, piece, part of a Bitcoin, or less than 1 BTC. Technically, a single piece of Bitcoin can be split into 100,000,000 pieces.
READ: How to Invest in Bitcoin
Each piece, called a Satoshi, is equal to 0.00000001 bitcoin. You can purchase as little as $1 worth of Bitcoin from cryptocurrency exchanges like Changelly; the best and most recommended cryptocurrency exchanges for newbies.