What makes Bitcoin the most popular cryptocurrency? Bitcoin is an innovative payment network and a new kind of money. Find all you need to know and get started with Bitcoin.
We highlighted Cryptocurrency as The Top 10 Technologies of this decade. What is cryptocurrency and what makes Bitcoin the most popular digital form of money?
What is Cryptocurrency?
Cryptocurrencies are a controversial relatively new medium of exchange. Historically, civilizations have been using various things as mediums of exchange to make trade easier and quicker for all parties involved. We came a long way from using cattle directly in barter to shekels to coins to banknotes to digital money that we are used to today. The early concept of cryptocurrency originated in 1983 when cryptographer David Chaum conceived untraceable digital money and named it “ecash”. The cryptocurrency industry is based on Blockchain Technology. It led to people improving upon the work & idea by Chaum.
Read more about Cryptocurrency and the future they promise.
So, what is Bitcoin?
Bitcoin is the first successful cryptocurrency, invented in 2008, by a person or a group of people with the name Satoshi Nakamoto. The currency began to be used in 2009 when its implementation was released as open-source software. It is not like any traditional currency, it is a lot different and offers great advantages. It is a new medium of exchange but a digital medium or a digital currency. What makes Bitcoin unique from any other currency is the decentralized nature. Now, what does decentralized mean? It means that there is no central authority having control over it. “Oh, then is it safe to invest in such currency?” would be the next question on your mind. Will it be accepted by the government? It is yet, the war is still going on. There will be many more questions in everyone’s mind.
Let’s first look at the meaning of decentralized in depth.
There are two main attributes:
1. No central server, peer-to-peer network
2. The bitcoin ledger is distributed, no central storage
The identities of participants are maintained anonymously in the ledger, their respective cryptocurrency balances, and a record of all the genuine transactions executed between network participants. The ledger is maintained by a network of equally privileged miners, with no single administrator. Anyone can send a transaction to the network without needing any third-party consent; the network merely confirms that the transaction is legitimate.
These attributes make Bitcoin better than any traditional currency. But there is not just one cryptocurrency. The competitors of Bitcoins include Ethereum, Litecoin, Cardano, Polkadot, Bitcoin Cash (BTC).
What makes Bitcoin better than any other cryptocurrency?
As of January 2021, there are more than 4,000 cryptocurrencies with several of them hailed for their features. However, Bitcoin still ranks better than all the others.
1. Security: Being the oldest cryptocurrency it has the biggest network and is not easy to hack. Bitcoin is encrypted and backed with a special system called the blockchain.
There is no central server storing the records hence, hacking will require a breach of a huge number of servers whose records are timely volunteered for verification. Users need to make sure that all personal information is kept hidden away from any spying eyes. The risk of being stolen is very low, but not nil.
2. Network: Bitcoin has built a proven network over years. It is more accessible with more IMGchants, software, hardware, community support and has users in millions now. It has higher liquidity than any other cryptocurrency.
Is Bitcoin Legal?
The majority of countries that have made Bitcoin legal are in the Americas and Europe, which means highly developed countries. European countries including the UK, Germany have favorable attitudes towards Bitcoin. Other Countries where bitcoin is Legal to include Australia, Japan, Canada, and South Korea. Some countries in Asia have also partially accepted it. The tax and exchange rules are different for countries.
It has to be noted that the creation of a decentralized and distributed payment system of Bitcoin has not yet happened completely. To function effectively as a currency alternative, crypto must be liquid, possess relatively low price volatility, and be integrated with established financial institutions. Further, Bitcoin investment is incredibly speculative and volatile. Stock trading can give you a similar thrill but picking stocks of established companies is generally less risky than investing in Bitcoin. There are alternatives emerging to Bitcoin. Most notably, Stablecoins, the recent pilot launch by Visa.
How to use Bitcoin?
Bitcoin is different from what you know and uses every day. Before you start using Bitcoin, there are a few things that you need to know to avoid common pitfalls.
The first is to select your wallet. Free bitcoin wallets are available for all major operating systems and devices to serve a variety of your needs. For example, you can install an app on your mobile device for everyday use or you can have a wallet only for online payments on your computer. In any case, choosing a wallet is easy and can be done in minutes.
You can get Bitcoin by accepting it as a payment for goods and services. There are also several ways you can buy Bitcoin.
To spend Bitcoin, there are a growing number of services and merchants accepting Bitcoin all over the world. Use Bitcoin to pay them and rate your experience to help them gain more visibility.
Merchant process with bitcoin
Bitcoin does not require much change in the regular merchant process. However, before you start using Bitcoin, there are a few things that you need to know in order to use it securely.
You can process payments and invoices by yourself or you can use merchant services and deposit money in your local currency or bitcoins. Most points of sales businesses use a tablet or a mobile phone to let customers pay with their mobile phones.
For, accounting and taxes, merchants can deposit and display prices in their local currency. In other cases, Bitcoin works similarly to a foreign currency. To get appropriate guidance regarding tax compliance for your own jurisdiction, you should contact a qualified accountant.
As bitcoin is gaining visibility, there is a growing number of users searching for ways to spend their bitcoins. You can submit your business in online directories to help them easily find you. You can also display the Bitcoin logo on your website or your brick-and-mortar business.
The increasing investment in Bitcoin by the futurists is garnering just the right attention for this currency.
The strong performance of Bitcoin has not escaped the notice of Wall Street analysts, investors and companies. In August 2020, business analytics firm MicroStrategy announced that it had invested $250 million in Bitcoin, purchasing 21,454 Bitcoin as part of a capital allocation strategy. The company has increased its total investment in Bitcoin to $1.145 billion since then.
MicroStrategy CEO Michael Saylor said "This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy."
Following MicroStrategy's lead, Square, the payment platform, announced that it had invested $50 million in Bitcoin, buying a total of 4,709 Bitcoins. Square said the investment represents about 1 percent of its total assets. Square said it was making the purchase because “Bitcoin has the potential to be a more ubiquitous currency in the future and an instrument of economic empowerment that provides a way for the world to participate in a global monetary system.”
Bitcoin has been more volatile than stocks
Because of its uncertainty, it might make sense to limit the amount of Bitcoin in an investment portfolio
There is the potential for dramatic growth with Bitcoin—but also for a dramatic loss
Read more on The Top 10 Technologies of this decade here.
Shriya Madan, an ardent learner, a digital enthusiast, aspires to make an impact in the real world with the power of technology
Pranjali Apurva, driven by curiosity, converging design principles with digital transformation
Is Bitcoin a Good Investment? - Benzinga