Bitcoin is the first cryptocurrency in a decentralized form of digital cash. It eliminates the requirements for traditional intermediaries like banks to make any financial transactions. When the Bitcoin price rises, so do the interest of the public in buying Bitcoin.
Investors need to know that investments can carry risk, but the riskiest are experimental cryptocurrencies like Bitcoin. Therefore, it is always advised not to invest more than you can afford to lose.
What is Bitcoin?
Bitcoin is known to be a type of cryptocurrency created in 2009, and marketplaces are known as ‘bitcoin exchanges’ help people to buy or sell any bitcoins by using different currencies. The Bitcoin transactions are made without any middlemen, which means that no banks are involved.
One can use Bitcoin to book hotels on Expedia, buy furniture on Overstock and go for the Xbox games. Much of the hype that Bitcoin creates is about getting rich by trading it.
How does Bitcoin work?
Every Bitcoin or BTC is a computer file stored in a digital wallet on a computer or a mobile phone. In order to understand the way it works, one needs to understand the following terms and a little context.
The open-source code is known as blockchain power Bitcoin and creates a shared public ledger. Every Bitcoin transaction is a block chained to the code, thus creating a permanent record of every transaction. More than 6,000 cryptocurrencies are powered by the Blockchain technology that has followed in Bitcoin’s wake.
- Private and public keys
The Bitcoin wallet has a public & private key, and these work together to help the owner initiate and digitally sign any transactions. Therefore, it provides proof of authorization.
- Bitcoin miners
Bitcoin miners are also known as members of the peer-to-peer platform. They independently confirm the transaction by using high-speed computers, generally within 10 to 20 minutes. For these efforts, miners are paid in Bitcoin.
There is a digital wallet that stores Bitcoins, and it either exists in the cloud or on the user’s computer. The bitcoin wallet is a kind of virtual bank account with which the users can send or receive bitcoins, pay for any goods or save their money. It is worth noting that unlike bank accounts, the Bitcoin wallets are not insured by the FDIC.
The Bitcoin anonimity
Though every transaction of Bitcoin is recorded in a public log, the buyers’ and sellers’ names are never revealed; they only have Wallet IDs. It helps to keep the Bitcoin users’ transactions private, but it also lets them buy or sell anything without getting tracked. This is among the main reasons why Bitcoin has become the currency of choice for many people.
The perceptions almost entirely define the value of Bitcoin. Simultaneously, some economists consider it to be entirely worthless, but others suggest that it could hit very high if it becomes as established as gold for the investors. However, to match such a reputation to build up over the millennia, as a thing worth owning and with little intrinsic value, Bitcoin needs to become much less volatile.