How Bitcoin Works and How to Use It – A Primer…

What is bitcoin?

It is a decentralized digital form of currency. It is not controlled by central banks or any other entity whatsoever. Bitcoin is becoming a popular mode of payment in the transfer of goods and services. It is acceptable in any country all over the world. It has no regulator, so go-betweens such as banks and credit cards are not required in this exchange. An owner of this form of currency just needs to make a direct transfer from their phone to the seller of the desired goods and services. The transfer is instant.

Since the banks are not involved, bitcoins give users many advantages;

•    Transaction fees are eliminated

•    There is no risk of having the accounts frozen by the authorities, hence the freedom to acquire anything from anywhere.

•    It is not based on the value of gold as conventional cash. It is based on Mathematics.

•    It is anonymous. Even the developer of the software, Satoshi Nakamoto, is unknown.

•    All the transactions ever made using any single bitcoin is known and recorded in a ledger that is available to the public. This ledger, referred to as the blockchain makes it a transparent mode of payment.

•    It is fast. The transfer is made and received on the other side instantaneously.

How to get bitcoins

Traditionally, it would be up to the central bank of any country to print new currency when the need arises. Noting that in the case of bitcoins there are no central banks involved, they are primarily acquired through these three methods;

•    Mining-This is a way in which people all over the world-known as miners- can use a specific software on their computers to solve mathematical problems that generate up to 50 bitcoins.

•    Buying them from exchanges. The purchase can be made through credit cards, PayPal,

•    Exchanging goods and services for bitcoins.

Regulation

Even with no authority controlling the amount of currency in circulation, there needs to be a way of regulating this legal tender; otherwise, it would be highly inflated and lose its value. The developer of the software that mines bitcoin designed it such that there can only be a maximum of 21 Million bitcoin in circulation at any given time. Currently, about 15.2 Million has already been mined. The system self-regulates by adjusting its mathematical equation, effectively making it increasingly difficult to mine new bitcoins. One bitcoin can, however, be split several times, its least value, being the ‘satoshi.’

Storing your bitcoins

When you acquire bitcoins, either through mining, exchange or purchase, you will require an online storage for them. A Bitcoin ‘wallet’ acts as a bank account would. You could have a wallet that allows you to spend as you would, just like a checking account.

Depending on the security you need, your wallet could be an online web service, software stored on your computer’s hard drive, or an offline vault that is safe and even utilizes a number of keys. The latter is the most secure. This last method is more popular with people that wish to hold their bitcoins for speculative purpose. Since theirs is more of an investment than a mode of payment, they do not have the need to exchange it in stores unless when selling.

Spending your bitcoins

It has become increasingly easy to find merchants who accept bitcoins as a mode of payment. Initially, most sellers did not feel confident enough in bitcoin. However, many online stores in the US and other parts of the world are embracing it. Large companies such as Dell, Microsoft, Tiger Direct, and DISH Network are accepting bitcoin as a form of exchange for their Apps, software, PCs, and other gadgets. Retailers such as Overstock, Newegg, France’s Monoprix, and Showroomprive.com also accept payment via bitcoin. In the beginning, Overstock only allowed it in the US alone but has since made it acceptable in all its stores all over the world.  In air travel, AirBaltic, Air Lituanica, CheapAir.com, and BTCTrip have also embraced his mode of payment.

The value of bitcoin keeps fluctuating. The one thing constant, however, is that this method of payment gains momentum every day. It has come a long way from where the journey started in 2009. Some schools of thought say it is not worth anything at all, being only a digital mode of transaction, but the signs in the recent past show the contrary. It is fast becoming a preferred means of exchange in the world. The anonymity, cost, and pace of using bitcoin as opposed to hard cash are too attractive to be ignored. Also, investors are buying it and keeping a healthy amount in the hope that soon this cryptocurrency will rise even more in value than it has. That will make a good payday.