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Understanding Bitcoins, Cryptocurrency and Their Advantages
Bitcoin is a kind of digital currency made and stored electronically. Unlike dollars or euros, they are not controlled by any party. They have no printed form, but are instead produced by businesses as well as individuals by way of software that works around 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. You know that if you put a dollar in the bank, you will get some gold in return, although is purely theoretical. Bitcoins, however, aren’t based on gold but on mathematics. In various places around the globe, people make use of software that follows a mathematical formula as part of the bitcoin production process. Because this mathematical formula is freely available, anybody will be able to can check it. Even the software is open source, which means everybody can pitch in to make sure that it does what it should.
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. But there are several advantages offered by bitcoins, including:
The bitcoin network is not under any central authority. Each bitcoin-mining machine that processes transactions is part of the network, and all machines work together. Therefore, in theory, no central authority can interfere with monetary policy and trigger a meltdown – or just decide to snatch bitcoins from their owners. And even with a part of the network being offline for whatever reason, the money will remain where it is.
Conventional banks can have too many and sometimes too inconvenient requirements before you can open a simple account. Opening a merchant account is just another tedious task made complicated by bureaucracy. In contrast, a bitcoin address can be set up in seconds, with zero fees and zero 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. The bitcoin network, however, stores all details of each and every transaction you make in a massive digital ledger referred to as the blockchain. The blockchain contains everything. If your bitcoin address is set at public, anyone will be able to see tell how many bitcoins you have stored at that address. But they’ll have no inkling that it’s yours. There are a lot of things you can do to maintain your anonymity on the bitcoin network, like varying the bitcoin addresses you use and avoiding putting too many bitcoins into a single address.
Small International Transfer Fees
Compared to the huge transaction fees banks collect for international transfers, bitcoin fees are minuscule.
Speed and Non-Repudiability
With bitcoins, you can send money wherever in the world and it will get there in a matter of minutes, provided the network is online. Finally, it’s non-repudiable. After your bitcoins are sent, you can’t get them back, unless the recipient sends them back them to you.