One of the most amazing things about Bitcoin is the fact that it’s a completely decentralized currency. Therefore, no government, financial institution, or authority figure controls it.
London, United Kingdom: In the last few years, there has been a lot of talk about a new wave of currency that would revolutionize the financial industry. This new-age digital currency is known as cryptocurrency. Bitcoin is the most popular and most valued cryptocurrency in the market, with a market cap of more than one trillion dollars. What’s even more jaw-dropping is that one bitcoin costs more than 50,000 dollars as of March 2020. For this reason, many traders feel the urge to buy bitcoin as it continues to display impeccable performance. Even so, before jumping headfirst into the bitcoin ocean, you need to understand what it is and how it works.
What Exactly Is Bitcoin?
In simple terms, bitcoin is a digital currency. Hence, there are no physical bills or coins that traders use when exchanging bitcoins. Moreover, cryptocurrencies are decentralized, meaning that there isn’t any central authority, such as a bank or government, that controls them. The people who own bitcoins remain anonymous since the system uses encryption keys to connect them. Hence, there are no receipts, IDs, or names used when people make transactions using bitcoin.
How Do People Acquire Bitcoin?
When people say that bitcoin is digital gold or diamond, it isn’t an overstatement. The principal method people use to obtain bitcoin and other digital currencies is mining. Although it may sound absurd, people acquire bitcoins by mining them on the internet. In this case, shovels don’t do the mining but very powerful computers that solve complex mathematical equations. It’s worth noting that, at any given time, thousands of miners are simultaneously working on the same equation, and only the first one to complete it gets awarded with bitcoin. There are about 19 million bitcoins in existence. The anonymous developers of bitcoin capped the total number of the financial asset at 21 million. Therefore, there are only a limited number of bitcoins left.
However, mining isn’t the only way that people can acquire bitcoin. Several platforms allow people to buy, sell, and hold bitcoins. Some of these platforms include Coinbase, Coinmama, and Kraken. Furthermore, you can accept bitcoin as a form of payment, earn them by completing online tasks, receive them as interest payments, or earn them through trading. Regardless of how you acquire your bitcoin, you’ll need a digital wallet to store the cryptocurrency safely. Nevertheless, these wallets are easy to set up and are available on crypto trading platforms.
What Determines the Value of Bitcoin?
Bitcoins have value because people can use them for monetary transactions. Essentially, the demand that bitcoin has is what determines its price. Therefore, if the need for bitcoins increases, the price also goes up. The only downside to this is the fact that bitcoin still hasn’t reached its full market potential. Therefore, it doesn’t take a large amount of money to alter the price of bitcoin. This makes bitcoin quite volatile and can be detrimental if not carefully analyzed.
What Are the Uses of Bitcoin?
As mentioned earlier, bitcoin’s principal purpose was to complete transactions. For this reason, people can use bitcoin as a means of payment. You can also use bitcoin to trade in various markets and for purchasing goods across several sectors. There are currently more than 100,000 merchants who accept bitcoin as a form of payment globally, and this number continues to grow each day.
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