WHAT IS BITCOIN?
Bitcoin is a form of open source digital money which are created and owned electronically. These cannot be printed like Euros and Dollars. They are a global money system which allows pseudo anonymous trading across the globe. This is a peer-to-peer or P2P system in which no intermediary is required. U.S. Treasury has recently categorized bitcoin as a virtual currency. This is a decentralized system as well, that is, it works without any central administrator.
Is bitcoin legal?
In most of the countries bitcoin is legal just like any other foreign currency. However there are countries like Russia and Argentina which have very strict laws regarding foreign currencies. As a result there are added rules and regulations for the use of a digital currency like bitcoin. But it has not been made illegal in most of the countries.
The Financial Crimes Enforcement Network or FinCEN issued a guidance about the characterization of activities involving virtual cash like bitcoins. However these are non-binding and more of guidelines than rules.
The economics of bitcoin
Bitcoins can also be called crypto-currency since they can be used in place of real currency for multiple online transactions. Bitcoins can also be exchanged for other currencies as well. It is common for bitcoins to be sold offline as well especially from bitcoin ATMs. However in most cases bitcoins are bought and sold through online bidding. The economics of bitcoins is rarely completely understood as they are extremely volatile and there are multiple factors which dictate their bubbles and busts.
Bitcoin is very similar to any software application for phone or computer which can provide the user with a personal wallet for bitcoins. The user can simply use the app to send and receive bitcoins. Although there are millions of pseudo-anonymous bitcoin transactions each day there is a public ledger called the Block Chain which holds all the transactions ever processed by the bitcoin network. The sending addresses are authenticated by digital signatures which are unique for each user.
The development of bitcoin and the bitcoin network
Bitcoin was first brought into being by Wei Dai in 1998. This was the first example of the modern crypto-currency. The first ever mention of the current form of the digital currency was in a cryptography mailing list by Satoshi Nakamoto in 2009. He left the bitcoin community in 2010 and since then the currency has developed under the vigilance of multiple community members.
It might be hard to believe, but no one controls the bitcoin network. This currency is controlled by all the users from around the world. It is an open source currency in the true sense of the term. The developers cannot even force the users to opt for the same software version. Any user can use a compatible version of any of software of their choice. The bitcoin network is maintained by the people and their common interest of using bitcoins.
The anonymity involving bitcoins
Bitcoins have been designed by users with the sole purpose of conducting transactions with maximum permissible levels of privacy. Bitcoin cannot be classified as an anonymous currency, it is rather an open source, pseudo-anonymous currency. Use of bitcoins leaves an extensive digital trail which can be used to trace both sender and receiver.
Bitcoin is a refreshingly transparent currency which is completely public and traceable. For those who are concerned about protecting their privacy, there are a number of methods which aid in protection of privacy. There have been numerous cries from all around the world regarding the supposed anonymity of bitcoin transactions. However the team behind the currency system ensures that bitcoin can be subjected to the same regulations that are already applicable for the current financial systems. Bitcoin has been designed and modified to prevent a wide range of financial crimes.
What is bitcoin mining?
Bitcoin mining is the method of processing transactions in a secure network by spending computing power. This is comparable to a data center except the decentralized nature of the currency keeps people from assuming a single control center. This process is a temporary mechanism for creating new bitcoins. Bitcoin miners run these software programs assisted by special hardware which allows them to make a leg of all the bitcoin transactions from around the world through a P2P network. Mining is hence an extremely essential process which allows smooth running of all the services necessary for the secure payment network. Miners are rewarded by bitcoins which they can either exchange for real cash or save for greater returns.
What are the advantages of using bitcoins?
In addition to the multiple uses of bitcoins there are a number of other advantages which a bitcoin miner can enjoy.
Let us explore a few of these benefits-
You can choose your fees: there is no fixed fee for sending bitcoins. Most of the wallets will allow you to control the charges of bitcoin transactions. More often than realized, a higher fee is directly related to a faster confirmation of the transactions. In addition to this, there is no fee for receiving bitcoins.
Merchants can make use of specialized processors which convert the bitcoins to real currency and deposit the funds directly into their bank accounts.
Freedom of payment: you can pay for the services and products during any time of the day right from your home. This is especially advantageous for gamers who wish to trade their coins for new lives, levels and achievements. All bitcoin users have complete control of their (digital) cash.
High security: users can control the transaction which means there are no surprise surcharges or unwanted processing fees. Also no personal information is tied to this
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