It’s hard to believe that Bitcoin is now over seven years old. What started out as a bright hope to circumnavigate the control of big banks has now turned into an extremely popular alternate form of currency.
If you’ve ever wondered just what exactly Bitcoin is, how it works, what you can buy with it, how safe it is, or indeed, just how big it is, then you’ve come to the right place.
Read on to dip your toe in the pool of Bitcoin…
What is a Cryptocurrency?
A cryptocurrency is a form of currency that is not attached to other world markets or banks.
There is no one overarching body that has control over any cryptocurrency, so it is said to be a decentralized form of currency.
It is money in digital form – there is no tangible asset, unlike physical cash with other currencies.
The name crypto comes from the way that they currency is transacted – with cryptography to confirm the transactions and creation of new currency units.
Where did it all start?
While there were various other widely unknown cryptocurrencies before 2009, it was the introduction of Bitcoin that took off.
Bitcoin itself was described in a paper in 2008 by Satoshi Nakamoto, titled Bitcoin: A Peer-to-Peer Electronic Cash System. In 2009, the system itself was released.
The paper described a peer to peer system of doing financial transactions simply and directly between two people over the internet.
How does it work?
While quite technical in nature, the way Bitcoin works can be broken down into more bite-sized chunks that make it a little easier to understand.
The blockchain is a documented register of every single Bitcoin transaction that is available for everyone to see.
Each computer running a Bitcoin network node has their own copy of the blockchain stored locally.
When a transaction is performed between a payer and a payee, it is then broadcast to each Bitcoin network node so that they can firstly validate the transaction, and then add it to the blockchain.
Each transaction needs to have in it Bitcoins that have not been already spent in another transaction. This can easily be verified by checking other transactions in the blockchain.
What can you use Bitcoin for?
While once upon a time Bitcoin was really only used in online darknet marketplace transactions in shady dealings, the cryptocurrency now is accepted by an ever growing number of merchants around the world.
This means that you can now use Bitcoin to companies like PayPal, Expedia, Microsoft, Dell, WordPress, and more! Even small shopfront businesses have started to embrace the currency offering the chance to pay in Bitcoin.
How do you keep your Bitcoin safe?
Bitcoin is stored in digital “wallets” which contain the cryptographic details necessary to decree ownership over given Bitcoin.
Each wallet contains a private cryptography key and a public cryptography key.
Wallets may be stored on your computer itself, online with a wallet provider (Bitcoin exchange), on your mobile phone within an app, or even in a print out paper wallet. Each type of wallet has its strengths and its weaknesses.
If you are looking at getting some Bitcoin, we recommend you carefully examine which type of wallet would be best for you.
Isn’t Bitcoin really volatile?
The volatility of Bitcoin is not intrinsically tied to any other world markets, which makes it a very interesting currency to follow.
A single Bitcoin has gone from less than a cents’ worth of value in early 2010, to its highest point of over $1000 in late 2013.
The peaks and troughs in the currency are related to two things in particular.
The first is the legality of cryptocurrencies (and Bitcoin in particular) in various countries around the world. And the second is the loss of massive amounts of Bitcoins from Bitcoin online exchanges due to hackers or thieves.
Because this second one is extremely difficult to predict, this means that the Bitcoin market is only as safe as the largest exchanges.
Although the coin seems to always recover, it can lead to some serious doubt in the power of Bitcoin at times.
While Bitcoin has been oft-derided over the years, and many thought that it would disappear completely at many times, it remains the world’s biggest cryptocurrency with a current total market worth of over $10 billion.
While Ethereum and Ripple pull up to try and make strides to become as big as Bitcoin this as yet remains to be seen. Why not buy some Bitcoin and try it out for yourself?