Bitcoin is a type of digital currency. As with other currency, it is used as a medium for financial transactions, except that it can be used only digitally. They are used outside banking domains and are transacted over the internet. You will be surprised to know that there are over 6000 types of such Crypto Exchange currency. Bitcoin is however the most popular and most widely used amongst them. It was first created by a pseudonymous software developer Satoshi Nakamato in 2009 as open source software. There is not much clarity about Satoshi Nakamato, i.e., it is still not known whether he was a person or a group or a company. The idea behind creation of Bitcoin was
- To develop a decentralized (independent of any regulatory authority) electronic currency.
- To develop an instantaneous financial transaction system
- To develop a system that was low in transaction fees.
Bitcoin can be electronically created by a process that we call Bitcoinmining. They can be created or mined by guessing a random number that solves the equation created by the Bitcoin protocol. The process sounds a lot simpler than it actually is. One needs swift and powerful computers to do so. Equations get increasingly complex as one mine each Bitcoin. Thus each Bitcoin mined is increasingly difficult and time-consuming than the one mined before.
Holders of these Bitcoin can transfer and transact them through the blockchain or the giant ledger. A blockchain is like a giant ledger that stores all the transactions that has taken place with the mined Bitcoin.
How can Bitcoin be used?
It can be pretty much used like any other form of electronic cash to buy things. It can also be traded on exchanges. It cannot be however converted into cash or any other form of regular currency.
Investing in Bitcoin
This is where interest of the hoi-polloi lies. For beginners, there are brokers who sell and Buy bitcoins. One can purchase them and thus stay invested in them. There being a limited number of it (there are only 21 million Bitcoin), their value is increasing over time. Thus, they like gold are a good investment option. However, it is important to remember that Bitcoin are very much susceptible to hacking and scamming. Thus as much as one is interested in investing them, one must be cautious of storing them in a good wallet with high-end security features.
Bitcoin Investing vs. Mining
Bitcoin Mining has grown at an unprecedented rate and is an industry of its own. However before investing in the mining process, one should remember that since there is an upper limit to the number of Bitcoin, the industry itself may not be sustainable in the long run.