Leon Luow a Nobel Peace Prize nominee said “Every informed person needs to know about Bitcoin because it might be one of the world’s most important developments” since Bitcoin was made availably for trade in 2009, it is undisputed that bitcoin is indeed one of the most important developments of the 21st century. so it’s very important you know what bitcoin is and start using it…
What is Bitcoin
Bitcoin is a form of digital currency. It is the first decentralized digital currency created and held electronically. No one controls it, be it government or organizations. Bitcoins are not printed, like dollars or the Nigerian naira. They can be produced by anyone using powerful computers that solve complex mathematical problems.
It is the first example of a growing category of money known as the cryptocurrency.
What differentiates Bitcoin from other currencies
Bitcoin can be used to buy things online or in shops that accept it, so it is like conventional currencies like dollars, euros, or naira, which are also traded digitally.
However Bitcoin is different from conventional money in the sense that it is decentralized – this means that it cannot be controlled by any political system, government or institution. So it is not vulnerable to any of their failings or devaluation. This puts some people at ease because it means that a large bank can’t control their money
Who created Bitcoin?
A software developer called Satoshi Nakamoto proposed bitcoin, which was an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
Who prints Bitcoin?
Bitcoin have no physical representation, it is not printed. Conventional money is printed in the shadow of its central banks which can simply produce more money to cover the national debt, thus devaluing their currency.
Instead, bitcoin is created (mined) digitally, by a community of people that anyone can join. Bitcoins are mined, using computing power in a distributed network.
Are there unlimited bitcoins?
No, bitcoin mimics real-world limited resource like gold. The bitcoin protocol (the rules that make bitcoin work) say that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the founder of Bitcoin), but the value of Bitcoin is steadily rising against every other currency.
What is bitcoin based on?
Conventional currencies like naira and dollar are based on gold and silver – theoretically, this simply means that if you take your naira to the bank; you can exchange it for gold or silver though, in reality, this is not the case. Bitcoin is not based on gold or silver it is based on mathematics.
Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available so that anyone can check it. The software is also open-source, meaning that anyone can look at it to make sure that it does what it is supposed to.
What are the characteristics of bitcoin?
Bitcoin have several favourable characteristics that set it apart from government-owned currencies.
1. It is decentralized
The bitcoin network cannot be controlled by one central authority. Every machine that mines bitcoin and processes transactions makes up a part of the network and the machines work together. That means that, in theory, if it was one central authority they can influence the monetary policy and cause a meltdown or simply decide to take people’s bitcoins away from them, as the Central European Bank decided to do in Cyprus in early 2013. And if some part of the network goes offline for some reason, the money keeps on flowing.
2. It is easy to set up
You pass through a lot of process in opening an account with conventional banks. You have to stand in long queues, provide regulatory ID card, utility bill, a passport-sized photograph, and sometimes birth certificate.
However, you can set up a bitcoin address in seconds, no questions asked, and with no fees payable.
3. It is anonymous
You can have as many bitcoin addresses as you want, the bitcoin address is not linked to you in any way – no names, address or any personal information, you are the only one that knows it belongs to you. But however…
4. It is completely transparent
…bitcoin stores details of every single transaction that ever happened in the network in a huge version of a general ledger, called the blockchain. The blockchain tells all.
If you have a publicly used Bitcoin address, anyone can tell how many bitcoins are stored at that address. but they don’t know who it belongs to.
There are measures that people can take to make their activities more opaque on the bitcoin network, though, such as not using the same bitcoin addresses consistently, and not transfer lots of bitcoin to a single address.
5. Transaction fees are minuscule
In Nigeria, the bank will charge you as high as 105NGN for interbank transfer and as high as $20 for international transfer. But the charges on Bitcoin transaction are very small about 30NGN not matter the size of the transaction anywhere in the world.
6. It is fast
You can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.
7. It is non-refundable
When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.