Bitcoin, is technically a digital asset and payment system that was invented by Satoshi Nakamoto in 2008. Bitcoin was released as an open source software in 2009. In less technical terms, bitcoin is a digital currency, which is often called cryptocurrency. It is also interesting to note that Satoshi Nakamoto is but a pseudonym used by the person(s) who have designed the bitcoin. The inventor(s) have still not come out of the pseudonym and function anonymously.
Bitcoins are not traditionally printed and are instead produced by users and several businesses through a process called ‘mining’. In addition to this, bitcoins can also be exchanged for other currencies, products and services as well. The users can control bitcoins with e-wallets which can further be managed through different electronic devices.
The characteristics such as purchasing power and investment application which are identified with traditional currencies is also present with bitcoins. The functioning is absolutely same as that of real money, with the only difference of this currency being virtual.
An interesting feature of bitcoins is that it is decentralized, which means that the government has no role to play in its working. As a result, the user becomes the full owner of the currency she/he possesses. To make transactions, the payer is required to sign digitally using the private key, without which the bitcoins remain useless and effectively lost. In 2013, a user claimed to have lost 7,500 bitcoins due to loss of private key. The coins held the value of $7.5 million at that time.
Just like its maker(s), bitcoin too follows the rule of pseudonyms. That is, the bitcoin transactions and funds are never linked to the real world and only fall in the realm of the virtual wallet through bitcoin addresses. However, if you want to exchange bitcoins for traditional currency, then you might be required to give personal information by law.
The bitcoin transactions are maintained in a public ledger termed as ‘block chain’. The block chain is a distributive database and is maintained by a network of communicating nodes running bitcoin software. The ledger contains information of all the transactions made by public users in it.
However, all is not lilies and roses in the world of bitcoins as they often attract frauds and scams. For instance, the opening of an account does not require any personal information unlike a real-world bank account, making it easier for scamsters to make their way into the currency market. Also, it was mentioned in a report by a Carnegie Mellon University that 4.5-9% of all bitcoin transactions in the world were for drug cartels and other illegal activities. Bitcoin has also been notoriously infamous for its increased usage by many people for buying child pornography.
Yet, the provision of making profit and easy transactions through bitcoin is something which has attracted people since the time of its inception. It has been used to trade in Forex and for binary options platforms as well. Bitcoin remains an alternate, virtual, digital currency whose introduction has immensely benefited various individuals and provided a new subject of study to economic theorists all over the globe.
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