You’ve probably heard of the term ‘bitcoin’. I know I have. It hit headlines in December 2017 when bitcoin reached its highest rate so far. So let me explain to you what bitcoin is in the simplest way possible.
What is bitcoin?
Bitcoin is basically digital money with no physical assets. It purely exists online. It is also the first decentralized digital currency. You can use it to pay and transfer money instantly, minus the hassle of banks plus lower fees. This is especially useful to people who transfer their money abroad. It not only saves time, but you can also save a couple of bucks.
Where do people keep their bitcoins?
So where do people actually keep their bitcoins? Each person has their own digital wallet and their own digital address. All you need is the other person’s digital address, and Voila! You get to make instant transfers.
How are bitcoin transactions recorded?
Each transaction is recorded is a digital ledger called the blockchain. Let’s say there’s Alice, who sends $5 to Bobby. Now, how can we make sure that Alice did in fact give Bobby $5? Bobby could easily lie and say that he didn’t receive the money, or Alice could have given less. So in order to have a clear record of the transaction, they write it down on a ledger. Then they show that ledger to all their friends who confirm that this indeed happened. This is where the blockchain comes in. It serves as a digital ledger that confirms and reports all the current transactions.
Who maintains the blockchain?
The people who maintain the blockchain are what we call miners. Miners are awarded their bitcoins for solving complex mathematical problems in order to confirm each payment. Thanks to the blockchain, sending bitcoins is safe and secure. But the reward for these miners to mine each bitcoin is going to be reduced after the next bitcoin halving event. Click here to read why this is so.
Why has bitcoin become so popular?
Bitcoin has become so popular lately because of several reasons. Firstly, sending money has become instant with bitcoin. We don’t need banks or money services to process each and every one of our transactions for us. Now we can just do it with a click of a button. Secondly, no banks intervention means no fees, and who wouldn’t want to save a bit of extra cash? Thirdly, bitcoins can now be used to make purchases. Growing number of stores in different countries are now accepting bitcoin as a legit form of payment. Did you know you could now purchase airline tickets with bitcoins?