An Introduction To Bitcoin

The technology I will be looking at is Bitcoin. It is a digital currency that uses peer-to-peer technology and does not involve any central authority or banks in order to operate. “Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part”. The purpose of Bitcoin is to globalize currency, create secure transactions that do not require personal information, and most importantly, allow transparency and neutrality, meaning that no individuals can manipulate Bitcoin and transactions can be seen by everyone so Bitcoin can be trusted neutrally. By downloading the free software, a user acquires a personal wallet that allows them to trade Bitcoins. Each individual wallet has a distinct alphanumeric address which is a string of letters and numbers. A transaction with Bitcoins is protected by a cryptographic signature which is a private key associated with each wallet. In order to acquire Bitcoins, one can: purchase Bitcoins on a Bitcoin Exchange, obtain through payments, or obtain by earning them through Bitcoin Mining. Miners use mining software to solve mathematical algorithms in order to obtain Bitcoins. The more Bitcoins that are in circulation, the more difficult mining becomes, and now, miners must use ASIC (Application-Specific Integrated Circuit Chips). ASIC is designed strictly for Bitcoin mining because other processors take up too much power, produce a lot of heat and use a lot of electricity which make them difficult for mining. Bitcoin will revolutionize digital currency/the currency market because of its peer-to-peer trading, no third-party involvement, minimal transaction fees, no charge-backs, full transparency, minimal time delay for transactions, no restrictions on trading, and also globalizes the way you can spend money.

Why Use Bitcoin?

The digital currency Bitcoin will enhance a user’s experience for many different reasons. For example, if one wanted to avoid high bank fees when using credit cards, they can use Bitcoins as an alternative because Bitcoin transactions are minimal or sometimes free. A user’s experience when handling Bitcoin may be enhanced because of its transparency and simplicity. When using Bitcoin, a user does not have to worry about transferring their currency from one country’s to another, it is globalized (there is no exchange rate because Bitcoin is the same all across the world). For example, when buying a shirt online, a Bitcoin user has the luxury of seeing what the exact price is of that shirt, and will not have to calculate the difference between two currencies (if the product is in a different country). This makes it much easier and much simpler for an individual using Bitcoins. Human needs will be satisfied because everything is easy to follow and simple.

How Did Bitcoin Come About?

Previous technologies that inspired Bitcoin include other crypto currencies that failed to reach the majority of the public. Before Bitcoin, there were other currencies that had similar characteristics, but failed due to lack of support. Bitcoin uses the same idea as “PayPal” and internet transaction methods. The difference between PayPal and the Bitcoin protocol is that it has no third party involvement and transactions are very transparent. Unlike Bitcoin, Paypal acts as a “middle man” and takes a percentage of every transaction. With Bitcoin, you are ridding yourself of this unnecessary middle man and avoiding the transaction fees that come with it. Bitcoin takes the elements of other internet transaction methods and condenses it into a way that can be used globally.
    Price of Bitcoin History in 4 Minutes

Can Bitcoin Replace Other Leading Digital Currency Options?

I think that Bitcoin will try to replace other leading online payment methods, such as PayPal. I believe this for reasons such as: security, business and privacy. With Bitcoin, all payments and transactions are secured, and there is no account to be hacked. A Bitcoin wallet is also encrypted. With PayPal, you need to put your personal information in. In addition, the company is a common target for hackers who are trying to get peoples accounts, and sending phishing emails. For business’, when selling goods or services, Bitcoin has no exchange rate from country to country and that benefits merchants when doing business. In addition, Bitcoin funds cannot be frozen, payments cannot be blocked and there are no chargebacks. Bitcoin is completely anonymous and every transaction can be seen publicly. All transactions are virtually anonymous and you do not need to tie your bank account up with your Bitcoin wallet. For PayPal, your account is directly tied toward your bank and credit cards, so if a hacker gets a hold of your account they can directly track you and find your identity. I believe that Bitcoin can become what PayPal and other payment methods currently are today and grow even larger.

Disadvantages Of Bitcoin

The nature of Bitcoin gives criminals an alternative to traditional money laundering methods. Since Bitcoin is anonymous, it caters toward black market activity (although this is a possibility, the actual amount of illegal trades are less than 1% of all transactions). In addition, since transactions are irreversible and that there is no “middle man” or third party to mediate, it makes people weary of wanting to spend and use Bitcoins. Since there is a set number of Bitcoins that will be created (maximum of 21 million) mining will become increasing difficult. This in turn makes the currency deflationary. This deflationary nature encourages people to save rather than spend Bitcoins. This is contradictory to what Bitcoin attempts to achieve; an alternative payment method.