In 2009, a man known only to the world as Satoshi Nakamoto released a revolutionary piece of software on the internet. Initially, the technology was disregarded by the online community and it was only used for illegal dark net transactions. Today, this technology is so powerful that governments are creating regulations for it and its market cap has a reached a staggering $64 billion dollars. “What is this revolutionary technology?” you may ask.
Well, it is Bitcoin.
We asked Dylan Buckley who has experience working for and investing in Bitcoin as well as other Cryptocurrencies such as Litecoin and Dogecoin to educate us on what the Bitcoin fuss is all about. Dylan Buckley is a freelance and self-help writer from Southern California.
What is Bitcoin?
Bitcoin is a decentralized, pseudo-anonymous, digital, peer-to-peer currency. In layman’s terms, it is a digital currency that can be sent and received without the need for a bank or payment service. Payment information is sent over a network and stored on a database known as the blockchain. Rather than storing names or sensitive information, however, the database stores what is known as a wallet address, which is the information that you give to others when you send or receive payment.
Why Is Bitcoin Popular and What Are the Advantages of Using It?
Bitcoin is popular because it is an online currency that is not controlled by banks or a government. The Bitcoin that you have stored is yours to control, it is simple to send to others since all Bitcoin is digital and all transactions occur online, and it is cheaper to send money to others than it would be if you were using a banking service or a payment service. If you are an investor, the volatile nature of Bitcoin’s price makes it ideal for turning a quick profit. Here are some other advantages of adopting Bitcoin:
- Inflation doesn’t occur in the cryptocurrency world. Rather than printing more money when people want it, the amount of Bitcoin that is available to Bitcoin users is limited. Over time, the amount that is released each year is halved. Eventually, Bitcoin production will be halted and all the Bitcoin will have been released. This is what makes it so valuable.
- All transactions made with Bitcoin are final. This is especially beneficial to business owners who frequently deal with customers that ask for chargebacks from their credit card companies after they’ve purchased something from you.
- Your personal and payment information can’t be stolen. A wallet, which is where you store your Bitcoin, has several layers of online and offline security. The main information that helps you log into and recover your wallet is stored offline and cannot be accessed through the internet. Also, your name and other information are not attached to your wallet. Therefore, merchants and hackers can’t sell your sensitive information or try to use your payment information after you’ve bought something.
- Bitcoin can be earned from home. This can happen through a process known as “mining”. Using specific software and hardware, you set up your computer to solve complex algorithms. If your computer is first to solve one of these algorithms, you receive a small portion of Bitcoin known as a Satoshi. However, this process is not recommended currently because mining has become far more complex as Bitcoin became more established.
- You don’t have to have a technology-related job to get a piece of Bitcoin. There are several websites on the internet known as faucets that will give you Satoshis for visiting the site and claiming your Bitcoin over certain periods of time. While this isn’t an income, it is an easy way to start investing.
What Are Some Disadvantages to Bitcoin?
Much like any type of technology, the use of Bitcoin has its disadvantages as well. The most notable of these disadvantages being the fact that Bitcoin hasn’t been fully adopted by society. While there are companies that have been established to make Bitcoin easier to use in our society, it is still extremely difficult to use it as a currency in the way that we would use dollars to do things such as pay rent or purchase groceries.
One of the reasons why it hasn’t been completely adopted is because of its competition with paper money. Governments and banks are not accepting of a currency that can’t be controlled and are creating strict regulations, laws, and taxes that deter potential Bitcoin users from attempting to use the cryptocurrency, which is another disadvantage to using Bitcoin.
Another issue with using Bitcoin is the fact that there are currently two types of Bitcoin available. Recently, the cryptocurrency community dealt with something that is called a “fork”. Bitcoin’s transaction speed was suffering and the Bitcoin community decided to create a new network that would increase transaction speed and allow users to send and receive the currency faster.
However, creating this new network also meant that a new cryptocurrency had to be created. The new currency is known as Bitcoin Cash and the older version that we are talking about is still known as Bitcoin. Whether or not Bitcoin Cash will ever become more popular than Bitcoin remains to be seen.
Along with this recent addition, the Bitcoin community will also be expecting the release of a new coin in late October. This coin, which will also be the result of a fork in the Bitcoin network, will give Bitcoin even more competition and all coins will be fighting to become the most used version of “Bitcoin.” As of the moment, the original Bitcoin remains the most popular of all the cryptocurrencies.
If you are looking at making money in Bitcoin trading then you are dealing in an instrument that is highly volatile with potential to make great gains but also great losses.
Wait, Cryptocurrency Community? Does That Mean That There Are More Cryptocurrencies Out There?
Yes. These alternate cryptocurrencies are known as altcoins and according to CoinMarketCap, there are around 1,126 altcoins available as of this moment. Don’t get overexcited, however. A majority of these altcoins are invaluable or poor investments. Some of them are scams, some of them are not mineable, and others have failed to establish a community that would give them enough value to be relevant in the cryptocurrency community. Before you decide to invest in any cryptocurrency, do your research and make sure that is stable enough so that you don’t end up losing money you can’t afford to.
How Can I Start Using Bitcoin?
If you are interested in earning, purchasing, or investing in Bitcoin (and have educated yourself on all the risks), you can follow these steps:
- Visit the Bitcoin website here.
- Choose a wallet where you will store your Bitcoins. There are four different types of wallets that you can choose from. You can choose a wallet that stores Bitcoins on your desktop or laptop computer, you can choose a device that stores Bitcoins, you can choose a mobile wallet that can be accessed from your phone, or you can choose a wallet that can be accessed through a third-party service. You could also print a paper wallet if you would like. Each type of wallet has its advantages and disadvantages so heavily research each type of wallet before you choose one where you will store your bitcoins.
- Accept your first Satoshis or Bitcoins. Depending on where you plan on getting your Bitcoin, this can be a long process or a short one. If you have a friend, you can have them send you some Satoshis to get you started. If you use a faucet, you can start collecting there until you have enough to send to your new wallet. If you plan on buying them, you will need to find a service that exchanges money and Bitcoin. This will often be a lengthy process, so be prepared to have documents that prove your identity nearby. Once you’ve found an exchange or company, you can then send Bitcoin to your wallet for safe-keeping.
If you’re more interested in investing in the alternative to Bitcoin, Bitcoin Cash, you can take similar actions here.
Is That It?
That’s it! Bitcoin is a relatively easy technology to use and requires little time to get used to. Before you begin using Bitcoin, however, you will need to do some research about the Bitcoin tax laws in your country. This will be discussed in great detail in the next article.
Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.