Over the last few years, Bitcoin has become a fairly well known concept, even making the headlines on a number of occasions. The idea that a brand new currency could be created which is completely detached from any central bank was always an interesting one, I have to admit. The thing is though, while that brief description is accurate to a point, there is actually a bit more you should know than just that. This is why I decided to write a comprehensive Bitcoin review, written in a way that is easy to understand.
What is Bitcoin?
As mentioned previously, Bitcoin is a kind of online currency which is not owned or controlled by any central bank. This means that processing fees to companies and individuals who accept Bitcoin as payment for a product or service are slashed dramatically in comparison to using conventional currencies. The behind-the-scenes software which makes Bitcoin possible is completely open-source, which means anybody can have access to every aspect of the code. Transactions made by Bitcoin users are done via peer-to-peer technology. This means that you should only use Bitcoin as a payment method when dealing with reputable businesses or people you know.
How do I get Bitcoins?
There are 3 ways to acquire a Bitcoin balance. The first method is simply to exchange your local currency for Bitcoins. Before you jump in and buy thousands of dollars worth, you must first understand that it is NOT recommended to keep your savings in Bitcoin. This is not because Bitcoin is a scam, which is something I have read a lot online. The reason is that because Bitcoin is still a new thing and has a very young economy which makes its value extremely volatile. Bitcoin should be seen as a high risk asset and if you receive payments with it, many service providers can convert them to your local currency. Of course, a high risk asset can also be highly profitable if you make your exchanges at the correct time. Like exchanging currencies, if you think the value of Bitcoin is going to rise, it may just be worth holding onto your balance. Likewise, if you think the value is due to fall, you can offload your balance to reduce risk.
The second way to earn Bitcoins is to accept it as a payment method for whatever you do as a profession. Businesses which accept Bitcoin have been viewed as up-to-date which I guess is a good thing with regards to gaining popularity. I would imagine that if you advertise that you can accept Bitcoin, you would make yourself stand out from the crowd to a certain extent too. Something you should probably know is that with Bitcoin being open-source, the transactions are stored publicly on the network. This means that the the balance and transactions of any Bitcoin address can be seen by anyone. The identity of the user behind an address, however, is hidden until the information is revealed during a purchase. On the Bitcoin website, it is stated that this is one reason why the addresses should only be used once. The third and slightly more confusing method to gain Bitcoins is by “mining”.
What is Bitcoin Mining?
When a central bank processes a transaction, a fraction of their server’s processing power is used in order to achieve this. Now imagine the number of financial transactions which are processed every hour. This requires an ENORMOUS amount of computer power, which is handled by warehouse sized rooms full of servers. These are located all over the world to ensure that if one server room is destroyed, the information on these computers is not lost. For example, imagine that the entire American banking system was stored on servers in the World Trade Centre in New York. When the horrendous events of September 11th 2001 happened. The entire country’s finance records would be destroyed, probably followed closely by the collapse of currency altogether. Put simply, the results would be catastrophic.
With Bitcoin, there is no central server system. Instead, a peer-to-peer network allows users to share the processing power required by becoming a Bitcoin “miner”. What this means is that using specifically designed software, these miners can allow their personal computer to process parts of the software’s algorithm. Each miner is connected to a specific network whose collective group of computers work on a specific problem. These miners are rewarded for their CPU juice with… You guessed it… Bitcoin!
It’s not quite as simple as leaving your PC on for weeks at a time and watching the Bitcoin roll in though. First of all, you need a computer which has a decent enough processor to cope with the problems it’s given. Usually, the processor found within a high-end graphics card is able to cope with more than your central processing unit (CPU). Aside from the issue of the average end user having an inferior machine to effectively mine Bitcoin, there is the extra cost of the user’s electric bill to take into account, thanks to the extra power consumed in order to process the information. Anyway, I may write another review at some point explaining the Bitcoin mining process at a later date as this review is supposed to just be an overview.
Is Bitcoin Safe?
I would say that Bitcoin is safe to use. The only thing which may put people off is its volatility. At the moment, it probably shouldn’t really be viewed as a currency in my opinion. What you are buying into is the idea of breaking free from the typical government controlled banking systems which, let’s face it, are all so corrupt and geared towards the success of the elite few. I don’t think it’s any coincidence that Bitcoin first appeared in 2009, just one year after the financial crisis of 2008. I think its creation was a group of people coming together to rebel against the hierarchy which caused the crisis in the first place. The fact that so many individuals have jumped on board is a good indication, as far as I am concerned, that the people are ready for change!
Is Bitcoin a Scam or is it Brilliant?
In summary, considering that it’s still very much in its infancy, Bitcoin is undeniably brilliant. Not only is it brilliant, but it’s also a necessary change to the way we exchange currency. The industrial revolution is over, yet we’re still processing currency exchange in the outdated manner we have used for centuries. Ok, all of the brainwork has now been transferred over to computers but the actual function is essentially the same. It may take a while longer for Bitcoin to be widely recognised and accepted by all major companies and businesses but it is something that simply has to happen. Bitcoin is here to stay!