Bitcoin is a type of digital currency that is electronically created and held. No person holds control of the Bitcoins and they are never printed like the normal currency. People produce the Bitcoins and use them in various transactions with their clients while operating online.
What makes bitcoins currency different from other currencies is that it can be electronically used to buy things. That way its more the same as other currencies that are digitally exchanged such as Yen, Euros and Dollars (Shankland, 2013). However it has a unique feature that differentiates it from conventional currency that is it’s decentralized. It’s not controlled by any single institution (Orcutt, 2015).
Bitcoin currency was created by Satoshi Nakamoto who is a developer of software. He proposed this based on a mathematical proof. He intended to create a currency not controlled by any central authority, that can be transferred electronically almost instantly and with minimal transaction fee (Satran, 2013).
Bitcoin cannot be physically printed. It draws its own rules and is not held accountable to the people. The central banks can only create extra money to clear the national debt therefore leading to currency devaluation. Bitcoins are formed by use of computing power through a distributed network and anybody is allowed to join this community of people. Transactions of virtual currencies can also be processed by this kind of network and this makes bitcoin an effective network of own payment (Satran, 2013).
This currency is based on mathematics unlike other currencies base on gold or silver. Globally people employ mathematical formula in software programs and they are creating bitcoins. The formula and the software are available and open to everyone (Orcutt, 2015).
Case study Analysis
The Advantages and Disadvantages of Bitcoin Currency
How the Bitcoins Work
Bitcoin basically uses mathematics. A blockchain works together with cryptocurrency. This is a big ledger that records all transactions made by Bitcoin with different addresses. Its open to everybody and the validity of the transactions can be checked by any computer. For a person to do Bitcoin transaction you need to know a private key and Bitcoin address. The address is a random sequence of 32-33 letters or numbers. It looks like an account number. A private key is also a sequence of numbers and letters that requires to be kept as a secret and is used to sign data (Satran, 2013).
The process of mining Bitcoins is very interesting. A person needs basic knowledge about it for operation of the Bitcoin system. It involves momentous mental efforts rather than physical. The process of mining Bitcoins aims at making a confirmation of transactions made and then creates new other coins in the blockchain. Such a ledger makes sure that the entire network knows of the transactions that are done from spending again and also enhances the users to check the Bitcoins at any given time (Orcutt, 2015).
That is to say, Bitcoin mining entails shuffling of random data that is kept in a block and then carry out a hash calculation. Hash in this case, refers to a result of hard calculations of mathematics which is hard to guess or predict. It is quite hard to comprehend the principles that are used in the case. The end product of the manipulation is attaining a hash that is lower a certain value. The miner in this case then sends the block containing the hash to the given network, waits to be confirmed and the in the end, the vital part is the whole process (Satran, 2013).
How one buys Bitcoins
Despite the fact that the digital money is not physical, there are many rules that govern it. The main question that people ask themselves is how they can incorporate the currency in their normal lives. It is quite understandable as to why people would like to buy the Bitcoins using the traditional methods of payments, despite the fact that there are other methods of payment like PayPal (Orcutt, 2015). Through the use of a MasterCard that has been connected to PayPal, one can be able to purchase the coins. Only with a few clicks in the end, one is able to purchase the Bitcoins.
The companies that use Bitcoin
Back in the year 2014, Overstock.com made an announcement that it would accept payments in Bitcoin. Many other online business organizations followed the same with companies like Amazon.com and EBay accepting the form of payment. The other major organizations that accept the use of Bitcoin include Wordpress.com, CVS, Tar5get, Home Depot, PayPal, Subway, Victoria Secret, Kmart Sears, Expedia, Dell, Zappos, Grooveshark and Apple App Store.
The Advantages of using Bitcoins
a) Bitcoins cannot be traced: The feature can be regarded as both a benefit and risk for the users of Bitcoins, but the benefit is stronger. One of the main comforts that are given by the currency is that it cannot be traced by any governing bodies that are concerned. All Bitcoins cannot be reached by any organization since they are only owned by just the user (Satran, 2013).
b) Cheap: all a long, the traditional transactions have been gaining from the transaction fees given in exchange for its services that are sluggish (Shankland, 2013). The currency and transactions of Bitcoin are enjoyed without any cost, and if not free, then the charges are so minimal.
c) Fast transactions: another great feature of the Bitcoin currency is that the transactions made are so fast. The payment of Bitcoins is instant and many people like it for this feature
Disadvantages of Using Bitcoins
a) Technicality: for any layman, the currency is not such easy to operate because it is a sophisticated technology to use as it has intimidating status. The technology needs a certain level of understanding before any form of use or application (Shankland, 2013).
b) Too Compact: with the use of Bitcoins, unlike credit cards, each user needs to take very good care wherever they place their digital coins since they are so easy to steal from. It is always advisable that one keeps a backup data of the wallet a person uses to help deal with such issues (Orcutt, 2015).
c) Volatile: The currency has never been stable at all. At one point it can be seen to be operating at the top while another time it is very low. Such cases of unpredictability might act as factors that turn off any users interested in the currency (Shankland, S (2013).
Conclusion
Bitcoin is a technology that can be compared with the traditional currency, but its unique features make it quite special to use. It has solved several issues existing in the digital world with its great features and advantages (Allison, 2015). The characteristics of the technology make for the advantages that are beneficial to the people who use the peer-to-peer system. In a most obvious observation, the advantages definitely outweigh the disadvantages and risks that are posed by the normal currencies.
One great feature of the Bitcoin that makes it really special is that it is a decentralized currency (Allison, 2015). There is no central body that controls it, hence no hard rules on how it is operated. The risks of carrying around printed money have been eliminated totally with the use of Bitcoins. However, the volatility and instability of the currency is a worrying issue to many users out there. People are always never willing to take such risks; hence such an issue turns them away from using the currency in any of their transactions (Satran, 2013).
References
Allison, I (2015). Barclays talks Blockchain, BitCoin, and Distributed Ledgers. Technology: International Business Times. Pp. 5.
Orcutt, M (2015). Is Bitcoin Stalling? MIT Technology Review. Pp. 12.
Satran, R (2013). How Did Bitcoin Become a Real Currency? Forbes. 10-11.
Shankland, S (2013). PayPal president David Marcus: Bitcoin is good, NFC is bad. CNET. Pp.1.
