We live in a world where each country defines its currency which make all transaction between sellers and buyers possible. Sometimes many countries agree to have one common currency like the E.U. Sometimes a currency lose all its value and became worthless. It reaches the highest level of inflation. Like what happened lately to Zimbabwe. Some other times, the whole economy is struggling in the other way. Deflation is all over it, and they can do nothing against it. In most cases, it’s because they are under the same currency with other countries so they can’t control it directly. (Like what is happening to Greece now, and what happened to Chypre in 2013)
And usually in these kinds of situations the government, especially the central bank, step in to save the situation. Either by printing more money and inject it in the market when it’s the deflation. Or by higher the interest rates when it’s the inflation time.
A light explanation for how it’s get done:
Deflation Time: goods and services are losing their value, or should I say, they are losing their prices. The prices go down so to counter it. Central banks print money and inject it. Since there is more money in the economy, the prices will go up again.
Inflation Time: The prices goes up a lot. The value of the money is decreasing. What you could get for $1 you will need $100 to get it (just an example). So to counter it, and save the economy. Central banks will higher the interest rates. The interest rates are the prices that everyone will pay to borrow money from banks. When the rates go up people will borrow less, there will be less money in circulation, and so it will stabilize the prices and the value of the money.
All of these are the most known currencies, that most of us, or I should say, everyone, has used and is still doing. But there is lately another kind of currencies. Known as cryptocurrencies. The most popular and worthy of them is: The Bitcoin.
So what’s the Bitcoin first?
The Bitcoin is a cryptocurrency. (Which means it’s a currency protected by using cryptography.) It’s a digital virtual cryptocurrency. And to make it simple to you: It’s a currency that it’s not printed or in the form of solid coins, it’s all virtual. It’s not worthless. It’s protected via cryptograms and it’s produced according to some mathematical algorithm.
What’s the principle differences between Bitcoin and other normal currencies?
You might be wondering what’s the qualities that distinguish Bitcoin from the rest. Well they are principally these 10 qualities:
1-Bitcoin is decentralized:
Which means that the Bitcoin network isn’t controlled by any central authority. There is no government or Central Bank that rules it. The Bitcoin network is composed by many people, normal people, like you and me. In fact, anyone who wants to get involved in the network can do it. The network mines the Bitcoin and processes the transactions. There is no higher authority that will affect this currency.
2-Bitcoin is anonymous:
All the transactions are made in an anonymous way. They are trackable to make sure they have been done, but you don’t recognize the other side as a person. Which means that “You” know what you bought, but no one knows who bought what. That way you can buy everything that you want and stay in respect of all your privacy.
3-With Bitcoin, when it’s yours it’s definitely yours:
Since there is no authority that can rule it. Every Bitcoin that you have, is definitely yours. There is no Bank, government, company that can take it far away from you. The nightmare of having your account frozen doesn’t concern Bitcoin at all.
4-Bitcoin is easy to send:
Since it’s decentralized, when you send/receive payments it goes directly from person to person. There is no bank or another third party that you payments need to get through it before than you get it.
5-Bitcoin transactions are cheap:
Since there is no third party in the transaction (except the miners that are rewarded) the fees for Bitcoin transactions are the lowest ever on the market
6-Bitcoin is worldwide:
You can send and receive bitcoin, anywhere in the world at any time. With no limits.
7-There is no Chargebacks with Bitcoin:
Actually, several people can scam others by using the protection that Bank accounts and electronic services, like Paypal, ensure. –The chargebacks, (refund)-. With the Bitcoin, it’s impossible to use this scam. When a payment is processed it’s definitive. Be careful!
8-Bitcoin isn’t inflationary:
Well, actually there is actual ups and down for the Bitcoin. There are some few phases of little inflation & deflation. But in the long term there will not be such a thing. The amount of Bitcoin that will ever exist has been defined before its creation. There will be exactly 21 million bitcoin in circulation all over the world. So only deflation will stay remaining.
9-Bitcoin is more secure than credit/debit cards:
Credit/Debit cards have been created in the 1920’s and 1930’s. So when the first cards appeared there was no Internet at that time. Nothing like online shopping. So credits cards were not conceived to work online, they are not completely adapted and secure! When you want to buy something from any website, you have to enter all your information: The expiration date of the card and its number, your name, and the CSV). So if anyone get this information, he/she will easily steal money from you.
Just an illustration. The keys are digital of course.
With the Bitcoin, it’s different. In Bitcoin, there are two keys: a private key and a public one. Maybe anyone can see your public key (which is also by the way your Bitcoin address). But you a definitely the only one who knows about the private key. When you are sending a Bitcoin payment, you “sign”/”agree” to the transaction by combining your both private & public keys.
As long as you don’t do anything reckless or silly like publishing your private key on a public social media timeline. You are safe!
10-Bitcoin’s transactions are fast!
Sending a check or do a transfer from account to account usually takes at least 48h in many banks. With Bitcoins, transactions usually take up to 10 min as big maximum. And if you want to do it without getting it checked by the Bitcoin Network (The miners) –which is something dangerous and I will always discourage to do- it can be done instantly!
Yes, I know, for banks the transaction can be faster than that, but usually with banks when you want it fast, you will get it more expensive! Banks will always over charge you for that.
Bonus: You can create your own Bitcoins!
Yes. You can totally create you own Bitcoins! Maybe you will not have the same advanced tools and technologies that central banks use to print normal money. But you can join the Bitcoin network, the miners, and mine some bitcoins!
I have mentioned many times the “miners“.You are may be wondering what is it exactly? Well, It’s very simple.
The miners constitute the Bitcoin Network. They are just normal people like you and me who links their computers and lend its power to resolve some algorithm wich allow to validate transactions. The miners get rewarded by a few amount of bitcoin. which is cut from the fee of the transaction and is also created since Bitcoin is still creating new units until it reaches 21 million Bitcoin in circulation.
Of course mining was at the beginning something that anyone can do just with a personal computer. Now you will need a way more power to do it. So the bills of Electricity and electronic material would be too high. Consequence? The ROI ( Return On Investment) will not be as good as you may want. But it may still good to be producing your own money while you are sleeping.
That’s why people instead of mining just by themselves, they join a pool of miners. A band of miners who all of them allows their resources to resolve the same algorithm and then divide the reward between all of them. There is also Cloud mining if you are interested.
What the story behind the Bitcoin? Who created it?
I should have started with the historic maybe….
Anyway. The Bitcoin appeared at the beginning of 2009. But the Foundation of Bitcoin hasn’t been made until September 2012.
And who is the creator? Well, no one knows! All that the world knows is that it’s someone with the pseudonym of “Satoshi Nakamoto“. And, No! Before even that you think about it, he is not necessarily a Japanese.
We don’t even know if Satoshi Nakamoto is a “He” or “She” or even a “They”…
The only thing that we can say is what may be the pseudonym means. If we cut it, we have that “Satoshi” means “clear thinking, quick-witted; wise”. “Naka” means “medium, inside, or relationship”. “Moto” can mean “origin”, or “foundation”. (I checked it in whatisthemeaningofname.com)
Do you know anyone in your entourage that respond to theses criteria? Well, that’s maybe the creator of the Bitcoin!
Ok for all of that, but how Bitcoin has a value?
It’s true that the Bitcoin is a revolutionary technology, but since 2009 to today, many new currencies appeared. Some proclaim that they have better technology that ensure more security, faster transaction, etc. But even with that, Bitcoin remains the king with the highest value of all cryptocurrencies. But, from where Bitcoin has this value? Why is Bitcoin so valuable?
Well, it’s a tough and hard question, we can only say that it’s due to three reasons: being a currency, an equity, and a social media.
Let’s detail that:
1-Bitcoin it’s a currency like other currencies:
That’s the first reason. Bitcoin is a currency like all the others. Currencies are used to pay in transactions. Without currencies, life would have been ( and it was) hard. Let’s say that for example you have 5 bottles of water, another person has 5 Lions. Both of you exchanged what you have to have a dog from a merchant. This means that each Lion has as much value as one bottle of water. That’s kind of nonsense!
Currency makes life simpler. If you want the dog. You will sell what you have (the bottles of water, the lions or anything else), get some money and then you will buy the dog and have some money left to do something else.
The currency serves as a value estimator for everything. That’s what help us to establish and rank the exact revenue from different resources. Without it, it would be impossible to compare between companies and businesses that practice in differents goods and services.
So currencies serve as value estimator and medium for transaction.
Usual currencies have value because governments give them the legal status, and each government accepts only its own money for the taxes. So what about the Bitcoin? It has no government and there are no taxes to pay to any central authority…
Well, So what dictates the value of the Bitcoin from the fact of being a currency, it’s only due to the transactions ability. And it serves as an estimator too. It doesn’t serve any government at all, but it does the principal missions of the currencies.
2-Bitcoin is also an equity
The Bitcoin is an equity as any stocks of a company is (Yes like the stocks of your favorite brand for example). There are nowadays many crypto-currencies as we said. But it’s only the Bitcoin that has the biggest value(check the coinMarket) and during the last years its value has had many swings. The value for each Bitcoin went from around $14 to reach $1000. Now it’s stabilized around $270.
It’s risky but tempting to speculate on it…
3-Bitcoin is a social media
Like Facebook, Twitter, and the rest? Well, not exactly.
We meant that Bitcoin is a big network! If it has its actual value it’s mostly because more and more people use it. It’s like Facebook when it just came in. It was a social media but doesn’t worth much. But now that it has more than 1 billion monthly active users it’s worth $100 billion according to this Forbes article. Same for Spotify, Apple, and the list goes on. When a big amount of people uses something, it magically gets worth billions!
In fact, the Bitcoin community is what works as a Backup for the Bitcoin value. Without the community, the Bitcoin would be worthless. (yes that’s totally possible)
So the most important asset is the community. The Bitcoin is the first cryptocurrency, usually the first isn’t necessarily the one that survive. For example in social media, there was myspace (hard to remember it, right?) but it’s facebook who succeeded. Same for Netscape and so many others.
Is the Bitcoin going to get beaten by one of his successors like the Litecoin or the Dogecoin? Who knows! Only time will tell us…
Anyway, from all of that Bitcoin is quite interesting then. You may want to have some by the time you have read till this.
Here are the solutions for you
How to get your first Bitcoins
Accept to get paid via bitcoin
That’s obvious. If you want to get a currency, you only have to start accepting payment in it and avoid the automatic conversion. Same with the Bitcoin.
Since Bitcoin is clearly a good investment. Many great companies have already started to accept payment with it.
For example:
The giant Microsoft accepts payments with Bitcoin, as it’s stipulated in the official blog.
And also companies like “saferVpn”
and so many more.(Dell, Time magazine, CheapAir…etc).
But well, bad side of the story. They don’t really accept Bitcoin directly, they accept US dollars, through some bitcoin processing partners. (for example: BitPay for the case of Microsoft).
Mine bitcoin
I thin I have already told you about it many times during this post. Without getting through all of it again, the process of mining is a hard process which need a quite big investment. But it will make sure for you to earn bitcoin even when you are asleep or hanging out with some friends.
someone is mining…
Use some sponsorship to have it
To put an Ad for the community of Bitcoin and get some Bitcoin as a reward is another way to it. Don’t worry the ad doesn’t have to be scammy or anything like that may scare your audience. The Ad consists on putting a Bitcoin price widget on your website (or something else). The widget will indicate the price of conversion from Bitcoin to another currency (dollar $, euro €, Pound £…etc).
Here is more information about the sponsorship.
Buy some bitcoins in exchange of dollars/Yen/Pounds..etc.
Trade your actual currency in exchange for Bitcoin. This is something which gets practiced more and more these days.
There are even some events where people meet each other. Buyer and seller of Bitcoin. And the rest of the community of course.
There are some events where Bitcoin lovers meet, and so there is the Trading of Bitcoin of course.
For example “The Satoshi square event”
So the Bitcoin is a great cryptocurrency, definitely not a scam or a Ponzi scheme. But is it without any bad aspect? Well not exactly. There is a question that it still shattering everyone, and it concerns the value of Bitcoin.
We said earlier that the Bitcoin value is determined by the three criteria: Currency, equity, and the community.
But the fact that there will be at the end only 21 million bitcoins sets a ceiling to the Bitcoin. It will protect it from inflation. But there is no roof for the Bitcoin. Without any further capacity to produce Bitcoins, in case of deflation there will be almost no way to save it. Add to that the fact that if the community of Bitcoin starts decreasing, the last people remaining will be the biggest losers.
Is it too early to decide if it’s the Bitcoin the currency of the future? Should we wait more years? Until there is 21 million Bitcoin?
That’s what I think, it’s still too early to draw a hasty conclusion.
And you what’s your thoughts about it?