Understanding Bitcoins and Their Advantages Over Regular Currencies
Bitcoin is a type of digital currency that made and held electronically. Unlike dollars or euros, they are not controlled by any party. They don’t exist in paper, but are instead produced by persons as well as businesses with the use of software that solves mathematical problems.
Bitcoins and Cryptocurrencies
Bitcoins are the first of an expanding classification of money called cryptocurrency. Traditional currency is based on gold or silver. In theory, you know that if you give a dollar at the bank, you will get some gold in return (although this isn’t actually practiced). However, bitcoins are based on mathematics and not on precious metals. In many places around the world, people are employing software programs that produce bitcoins by following a mathematical formula. This mathematical formula available to everyone, which means anyone can actually check it. Even the software is open source, meaning everyone can contribute to ensuring that it continues to do what it is supposed to.
Advantages over Traditional Currencies
Bitcoins can be used for making purchases electronically. In that sense, it’s no different from conventional currencies, which are as well tradable via this route. However, there are many advantages of bitcoins, including:
The bitcoin network doesn’t come under any central authority. Each machine that mines bitcoins and processes transactions is a part of the network, and the machines all work together. Thus, in theory, no central authority can meddle with monetary policy and set off a meltdown – or just take bitcoins away 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 for payment is yet another bureaucracy-complicated task. In contrast, it only takes seconds to set up your bitcoin address, no fees or questions at that.
Bitcoin accounts are anonymous – kind of. You can have several bitcoin addresses, and they won’t be linked to names, addresses, or any other piece of information that could provide a hint of your identity. However, the bitcoin network will store all details of all your transactions in a large digital ledger known as the blockchain. The blockchain contains everything. If your set your bitcoin address to public, anyone can see how many bitcoins there are at that address. But they’ll have no inkling that it’s yours. There are various measures you can take to increase their anonymity on the bitcoin network, such as avoiding moving too many bitcoins to a single address and using different bitcoin addresses.
Small International Transfer Fees
Transaction fees are negligible when compared to the charges made by banks for global money transfers.
Speed and Non-Repudiability
Bitcoins allow you to send money anywhere, and it only takes a few minutes to process the payment. Finally, it’s non-repudiable. After sending your bitcoins, you can’t recover them, except when the recipient sends them back your way.