What is Bitcoin (BTC)?
Bitcoin (BTC) is the decentralized digital currency that can be transferred on peer-to-peer bitcoin network. Bitcoin transactions are verified by the network nodes through cryptography and recorded in public distributed ledger called “blockchain”. Cryptocurrency was invented in 2008 by an unknown person or group using the name “ Satoshi Nakamoto”. The currency begin to use in 2009, when its implementation was released as open source software.
On 31 October 2008, the word Bitcoin was first defined in a white paper. It is the compound of the words Bit and Coin. As per Nakamoto’s own words bitcoin was created to allow “online payments to be sent directly from one party to another without going through a financial institution
Understanding Bitcoin (BTC)
Legality of Bitcoin (BTC) varies by region. Nine countries have fully banned bitcoin use, While the further fifteen countries have implicitly banned it. A few governments have used BTC in some capacity. EI Salvador has adopted BTC as a legal tender, although use by merchants remains low. Iran has used BTC to bypass sanctions.
It has been described as an economic bubble by at least eight recipients of the Nobel Memorial Prize in Economic Sciences. The environmental impact of Bitcoin is significant. Its proof-of-work algorithm for BTC mining is designed to be computationally difficult, which requires the consumption of increasing quantities of electricity, the generation of which has contributed to the Climate change. According to the University of Cambridge, BTC has emitted an estimated 200 million tonnes of carbon dioxide since its launch.
Some concepts for a similar type of a decentralized electronic currency precede BTC, but Bitcoin (BTC) holds the distinction of being the first ever cryptocurrency to come into actual use.
- Launched in 2009, Bitcoin (BTC) is the world’s largest cryptocurrency by market capitalization.
- Bitcoin (BTC) can be purchased via various cryptocurrency exchanges.
- Unlike fiat currency, Bitcoin is created, traded, distributed and stored using a decentralized ledger system known as a blockchain.
- Bitcoin and its ledger are secured by PoW (Proof-of-work) consensus, which is also the “mining” process that introduces new bitcoins into the system.
- As the first decentralized virtual currency to meet widespread success and popularity, Bitcoin has inspired a host of other cryptocurrencies in its wake.
- BTC’s history as a store of value has been turbulent; it has gone through several boom and bust cycles over its relatively short lifespan.
Founder of Bitcoin (BTC)
In 2008, the domain name .org was bought and an academic white paper titled Bitcoin (BTC): A peer-to-peer Electronic Cash system was uploaded. It set out the theory and design of the system for a digital currency free of control from any government and organization. The author using the name Satoshi Nakamoto wrote “ The root problem with conventional currencies is all the trust that’s required to make it work.
The following year the software described in the paper was finished and released publicly, launching the BTC network 2009.
Satoshi Nakamoto continued working on the project with various developers until 2010 when he or she withdrew from the project and left it to its own devices. The real identity of Satoshi Nakamoto has never been revealed and they have not made any public statements in years.
Now the software is open service meaning that anyone can view, use or contribute to the code for free. Many organizations and companies work to improve the software.
How to Mine Bitcoin (BTC)
A variety of software and hardware can be used to mine bitcoin. When BTC was first released, it was possible to mine it competitively on a personal computer; however, as it became more popular, more miners joined the network, which lowered the possibility of being the one to solve the hash. You can still use your personal computer as a miner if it has newer hardware, but the chances of solving a hash individually are minuscule.
This is because you’re competing with the network of miners that generate around 220 quintillion hashes per second. Machines called (ASICs) Application Specific Integrated Circuits , have been built specifically for mining- can generate around 255 trillion hashes per second.
To successfully become a BTC miner, you have several options. You can use existing personal computer to use mining software compatible with BTC and join a mining pool. Mining pools are groups of miners that combine their computational power to complete with the large ASIC mining farms.
There are various mining programs to choose from and many pools you can join. Two of the most well-known programs are BFGMiner and CGMiner. While choosing the pool, it’s important to make sure you find out how they pay out rewards, what any fees might be, and read some mining pool reviews.
Advantages of Bitcoin
Although BTC was created in 2009, it’s still considered a relatively new kind of currency, which comes with a lot of misinformation. Learning about the benefits of Bitcoin can help you to decide if it’s a good investment opportunity for you.
1- Payment freedom
It is possible to send and receive bitcoin anywhere in the world at any time. No bureaucracy, No bank holidays, No borders. Bitcoin allow its users to be in full control of their money.
2- Fewer risks for merchants
BTC transactions are secure, irreversible, and do not contain customer’s personal and sensitive information. This protects merchants from losses caused by fraud and fraudulent chargebacks, and there is no need for PCI compliance. Merchants can easily expand to new markets as per they want where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, fewer administrative costs, and large markets.
3- Security and control
BTC users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin (BTC) payments can be made without personal information tied to the transaction. This offers strong protection against identify theft. Bitcoin (BTC) users can also protect their money with backup and encryption.
4- Choose your own fees
There is no fees to receive BTC, and many wallets let you control how large a fee to pay when spending. Higher price can encourage faster confirmation of your transaction. Fees are unrelated to the amount transferred, so it’s possible to send 100,000 BTC for the same fee it costs to send 1 BTC. Additionally, merchant processors exist to assist merchants in processing transactions, converting BTC to fiat currency and depositing fund directly into merchant’s bank accounts daily.
5- Transparent and neutral
All information concerning the BTC money supply itself is readily available on the block chain for anybody to verify and use in real-time. Neither individual nor organization can control or manipulate the bitcoin protocol because it is cryptographically secure. This allows the core of BTC to be trusted for being completely neutral, transparent and predictable.
Disadvantages of Bitcoin
Despite its rapid growth and an increasing number of users, there are some disadvantages of BTC to consider, especially if you’re wondering, “Is it worth investing in Bitcoin? ”.
When BTC was created by Satoshi Nakamoto, a limit was set of 21 million bitcoins that could ever exist, which is why some bitcoin as being absolutely scarce. This scarcity is what makes BTC so valuable, but also what makes its prices vary because the price is now the only variable that can change to ensure demand.
There are also other factors that influence BTC’s volatility such as headline making news that is perceived as bad by investors, the uncertainty about its future value and uses, as well as security breaches.
2- Limited Use
Even though there’s a growing number of companies that accept BTC, such as Microsoft and some Subway franchises, it’s still not widely accepted. This puts the limit on where you can spend your money, unlike using a credit or debit card.
Since BTC transactions are unregulated and anonymous, another disadvantage is the lack of security. Transaction done through BTC are irreversible and final, so nothing can be done if the wrong amount is sent or if it’s sent to the wrong recipient.
In addition, there’s a risk of loss. Many Bitcoin users choose to keep their bitcoins in a cryptocurrency wallet, which puts them in risk of losing their investments if they lose access to their private key. In case a virus corrupts the record of your wallet or a hard drive crashes, your funds could become inaccessible or gone completely in a matter of minutes.
4- No Government Regulations
Sure, a decentralized currency can be viewed as one of the benefits of cryptocurrency, but it can also be considered a disadvantage of BTC, since it means investing in Bitcoin is not regulated. Unlike a currency that’s regulated by a central bank, BTC transactions don’t come with legal protection and typically are not reversible, which makes them susceptible to scams.
Another issue with BTC being decentralized is that there’s no guarantee of a minimum valuation. So if a big group of investors decides to stop using BTC and sell them, the value of bitcoin could decrease greatly and affect users with a large amount of the cryptocurrency.
Risk of Investing in Bitcoin (BTC)
Speculative investors have been drawn to Bitcoin after its rapid price appreciation in recent years. Bitcoin had a price of $ 7,167.52 on December 31, 2019 and a year later, it had appreciated more than 300 % to $28,984.98. It continued to surge in the first half of 2021- it then fell over the next months to hover around $40,000. As mentioned above in early 2022, the price started to drop and has continued to do so for most of 2022.
Thus, many people purchase BTC for its investment value rather than its ability to act as a medium of exchange. However, the lack of guaranteed value and its digital nature means its purchase and use carry several inherent risks.
- Regulatory Risk: The lack of uniform information about BTC raises questions over their longevity, universality and liquidity.
- Market Risk: As with any investment, BTC values can fluctuate. Indeed, the value of the currency has seen wild swings in price over its short existence. Subject to high-volume buying and selling on exchanges, it is highly sensitive to any newsworthy events. According to CFPB, the price of Bitcoin fell by 61 % in a single day in 2013, while the one-day price drop record in 2014 was as big as 80 %.
- Fraud Risk: Even with the security measures inherent with a blockchain, there are still opportunities for fraudulent activity. For instance, in July 2013, the SEC brought legal action against an operator of a Bitcoin-related Ponzi scheme.
- Security Risk: Most individuals who owns and use BTC have not acquired their tokens through mining operations. Rather, they buy and sell bitcoins and other digital currencies on popular online markets, known as cryptocurrency exchanges. Bitcoin exchanges are entirely digital and-as with any virtual system- are at risk from hackers, operational glitches and malware.
- Insurance Risk: BTC and cryptocurrencies and not insured through the Federal Deposit Insurance Corporation (FDIC) or the Securities Investors Protection Corporation (SIPC). Some exchanges provide insurance through third parties. In 2019, prime dealer and trading platform SFOX announced it would be able to offer BTC investors FDIC insurance, but only for the portion of transactions involving cash.
Like with any new technology, the attempts at regulating BTC have been difficult. The current Biden administration seeks to impose regulations around Bitcoin, but at the same time walks a tightrope in trying not to throttle a growing and economically beneficial industry.
Biden has stated he will seek to prevent the illegal use of BTC but also support its development. The U.S has particularly been focused on regulating crypto and its criminal usage overseas, such as sanctioning cryptocurrency exchanges and individual cryptocurrency wallets and recovering crypto payments made to criminals. There have also been calls for the U.S to develop a central bank digital currency (CBDC) to appropriately direct these sanctions.
As the Bitcoin and cryptocurrency world is emerging, so will the regulation, which will see many changes and laws over time.
How long does it take to mine one Bitcoin?
It takes an average of 10 minutes for the mining network to validate a block and create reward. The Bitcoin reward is 6.25 BTC per block. This works out to be about 100 seconds for 1 Bitcoin to be mined.
Is Bitcoin a good investment?
The BTC network of miners makes money from Bitcoin by successfully validating blocks and being rewarded. Bitcoins are exchangeable for fiat currency via crypto currency exchanges and can be used to make purchases from merchants and retailers that accept them. Speculators and investors can make money from buying and selling bitcoin.
What is the purpose of Bitcoin?
Bitcoin (BTC) was created as a way for people to send money over the internet. The digital currency was intended to provide an alternative payment system that would operate free of control but otherwise be used just like traditional currencies.
Who controls the BTC Network?
Nobody owns the BTC network much like no one owns the technology behind email. Bitcoin is controlled by all BTC users around the world.
Is Bitcoin Cryptocurrency?
Yes, BTC is the first widely adopted cryptocurrency, which is just another way of saying digital money.
Hope this article has helped you to clearly understand Bitcoin