You may have heard of Bitcoin last year, as many people did, when the digital currency hit international recognition. Of course, by that point, the digital currency was already four years old. So if you have some catching up to do, donít worry. The following is an introduction to Bitcoin.
What Is Bitcoin?
Bitcoin is what is known as a digital currency. This means itís a form of money that exists solely in the digital world. You can sell bitcoins, but not in the traditional sense of how you can sell, say, rare coins or exchange your dollars for Euros, in a physical sense. Instead people trade the currency over a Bitcoin exchange.
At the moment not everyone accepts Bitcoins. In fact, only a minority of businesses do. But that hasnít stopped their perceived value from skyrocketing since 2009. Letís now look at why that is.
Why Are Bitcoins Valuable?
Hereís where people have a hard time understanding how Bitcoin trading can become a valuable business. If itís solely online then there is absolutely no way it can have a physical form worth any money, like the case with rare coins and precious metals. However, unlike the US dollar, it doesnít have a government backing it either. And yet, people pay real (i.e. dollars, yen, Euros, etc.) money to purchase them.
There are a number of reasons for this, but all come down to perceived value. The first thing Bitcoin has going for it is actually that itís not backed by a government. Much of Bitcoinís success has been due to the fact that it premiered right around the time of the housing market. The US government reacted to it by sending billions of dollars to huge banks and corporations. People became cynical.
Another thing that bolsters the Bitcoin exchange rate is that it cuts out the traditional middleman. If you want to buy something online, youíre going to have to pay a middleman no matter what. Someone is going to transfer those funds and take their cut. Bitcoin has gained attention for attempting to alleviate this problem. By being a digital currency without the need for banks, people can easily trade with one another without needing a third partyís approval.
Which leads us to our next point. Spending Bitcoins is an act thatís almost completely untraceable. With revelations over the past year that showed the US government is spying even on its own citizens, many people arenít comfortable with spending money online, now that it hardly seems anonymous. Bitcoin has become the solution.
Lastly (though there are plenty of other minor reasons), Bitcoin has scarcity built in. Being a digital currency means itís nothing more than code and this code dictates that there can ever only be 21 million Bitcoins which are set to be released slowly but surely by 2140. This means inflation canít chew away at Bitcoins like it does fiat currency.
Is It Safe to Use Bitcoins?
In most countriesóin fact, everyone but China and Russiaóitís perfectly legal to purchase the digital currency off of a btc exchange. But that doesnít necessarily mean itís secure.
An exchange is simply where people purchase the currency. One common example would be a bitcoin USD exchange where people can pay in US dollars for Bitcoins or sell them for the conventional currency.
Before you decide to use a BTC USD exchange, you want to make sure you do your research on it first. This is always a good idea when using money online. However, with an exchange, you have the option of storing your money there as well. As a digital currency, you have to do it somewhere. So youíll want to make sure you investigate how sound the company is and how good their security measures are.
Recently, many people lost tens of thousands of dollars when an exchange called Mt. Gox folded. There had been a number of warning signs, but too many people failed to listen.
If you want to start taking part in the world of Bitcoin, first youíll want to figure out what the current Bitcoin rate is. Then, find a fast Bitcoin exchange where you can be assured of a quick transfer and purchase your first digital currency. Who knows? They could make you rich someday.