Your Bitcoin Questions….Answered.
Bitcoin just hit $18,915 per unit, and its growth is getting too hard to ignore. What was once a currency that was only understood by the geeky tech crowd, or the alternative-type investor, has become too relevant not to be understood by the masses. Below is an outline of the most common Bitcoin questions and answers for both Bitcoin layman’s and enthusiasts alike. Bitcoin is complicated. So complicated in fact, that it took me interviewing 6 people, watching a documentary, reading countless articles and taking a Princeton cryptocurrency course to collect the best information to write this article.
Why is Bitcoin Important?
Technology creates needs for us that we never knew we had by making everything we know faster, easier, and often cheaper; Bitcoin is no different. It is shaking up the banking industry by making banking faster and cheaper, without having to deal with the stringent rules and red tape of a bank.
David Namdar, Head of Investments for Galaxy Digital Asset Fund, compared bitcoin to email.
“Twenty years ago, if you wanted to explain email to most people, the question that would arise is ‘why bother, we have phones, mail and fax machines’. It took time for people to see the value in email, and how it could make our world more efficient, because it was so foreign.”
How Does Bitcoin Work?
Bitcoin is a blockchain, which means that it is a digital ledger that is not controlled by any one person or company. Unlike a typical government backed currency, which can be manipulated by central banks, there is no centralized version for people to corrupt, or for governments to change or manipulate. The blockchain is built throughout the internet, so in order to shut it down, the internet would have to be shut down.
What Are The Uses of Bitcoin?
Since its debut in 2009 debut, Bitcoin has allowed people to use an easily transferable, anonymous payment system. Many countries in the world do not have secure banking systems. Bitcoin gives individuals access to store their wealth in an invisible online vault that no one else can access. One of the biggest criticisms of Bitcoin is that governments can shut it down, but due to the blockchain technology, it is not actually achievable to be completely shut down. In September of this year, China required that all Bitcoin exchanges be shut down. This shuts down the exchanges, but peer-to-peer transactions can still exist. ￼
Where Do New Bitcoins Come From?
Bitcoin depends on miners to validate transactions, and store and broadcast the blockchain. Much like gold miners, Bitcoin mining is a large commitment of both time and capital. In order to mine gold, gold miners would have to purchase the appropriate equipment, travel to the right place to mine, give up anything else they were doing, and then also actually succeed at finding gold. It has been reported that Bitcoin mining uses more electricity in a year than the all of Ireland. Instead of having a central authority, Bitcoin uses miners to decide which transactions are valid, and ensure that Bitcoins cannot be duplicated. Bitcoin miners exist to validate Bitcoin transactions and add blocks to the ledger by solving complicated puzzles and math problems, receiving Bitcoins as a reward for their contribution.
How Can I Invest In Bitcoin?
There are numerous ways to invest in Bitcoin. The easiest and simplest way is through websites like coinbase or gemini that will allow you to buy and store your bitcoins through their site. There is also the Bitcoin investment trust, that follows Bitcoin prices (OTCMKTS: GBTC). Cold storage is a safe option to store Bitcoins if you hold large quantities. Cold storage allows you to store your Bitcoins offline, in order to reduce the threat of hackers.
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