What Is Bitcoin, How Does It Work, And Why Do We Use It?

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What is Bitcoin

Bitcoin has made quite the name for itself recently, with the digital currency and its compatriots appearing in headlines around the world. But even though Bitcoin has become somewhat of a household name, there are not that many people that fully understand what it is. And those that do often seem to have polarizing opinions – they either love it or hate it. In this article, we attempt to provide an object view of the somewhat mysterious currency that is taking the world by storm.

What is it?

Bitcoin was launched back in 2009 by an anonymous person or group that went by the name of Satoshi Nakamoto. Bitcoin is a decentralized currency. This means that it is not affiliated with any bank or government, although more and more governments have been making attempts to regulate it. Bitcoin is also a digital currency, which means that funds appear virtually and not in a physical form like traditional currencies.

Like any other currency, Bitcoin can be used to purchase products and services. While not all vendors accept Bitcoin as a valid payment method, there are more and more companies that do accept Bitcoin, and you can buy almost anything these days using Bitcoin or other Cryptocurrencies. Bitcoin can also be used in online investments and trading.

Bitcoin funds are stored in virtual wallets, which exist either in online cloud form or offline on the user’s PC or mobile.

How does it Work?

Bitcoin’s validation system is somewhat complex, but basically, the system relies on algorithms that are solved by Bitcoin ‘miners’. These algorithms ensure that Bitcoin spenders have the sufficient funds to purchase their favorite goods and services. The algorithms are added to the global Bitcoin ledger, which keeps track of all transactions. Miners are then paid out in Bitcoin for their hard work, which extends the Bitcoin economy.
Bitcoin’s economy grows further as more vendors accept it as a payment method as well as the inclusion of other Cryptocurrencies into the industry.

Why do we use it?

There are many reasons why people decide to use Bitcoin instead of traditional currencies. First of all, Bitcoin transactions are anonymous. You do not need to use your real name as your user name, which gives users privacy and security when making online payments. Transactions are pretty much impossible to trace to individuals.

Transactions are also speedy and reliable, and fees surrounding Bitcoin transactions are either small or non-existent. As we have already entered the digital age, where almost everything is digitized, it only makes sense for digital currencies to emerge as popular.

Where to from here?

Bitcoin has grown exponentially each year from when it started in 2009. Bitcoin undoubtedly has a place in the financial future. But what we can expect is that it will slowly become more regulated as more and more governments make efforts to control it. Very soon Bitcoin may be a part of almost everyone’s everyday lives – it wouldn’t be the first time it’s surprised us!

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