Almost everyone in the world has heard of Bitcoin, but many do not yet understand and ask the following questions…
What is Bitcoin?
How does Bitcoin work?
Why are people interested in Bitcoin?
Why is Bitcoin so different?
We will try to answer some of these questions with this article and hopefully give you a satisfying explanation.
Bitcoin is P2P
Much like a peer to peer file sharing network actually, this is also how this currency works. In a traditional file sharing scheme, you have a host or server the stores files and when a user requests them the server will allow the user to download the file. In a P2P file sharing method, there is no server storing files but rather groups of users that share the same files, so rather than downloading from one source (the server) you would download from a group of peers. How does this relate to currency?
This is why Bitcoin is taking the world so quickly, it doesn’t relate at all or at least hasn’t prior to now. This is a first for the concept of peer to peer currency. There is no regulatory commission, no government agencies, no president of some bank and no private entity or central body controlling it. Bitcoin is regulated by its own users/members.
Unlike other payment methods or online systems, such as Paypal or Authorize.net, it has it’s very own virtual currency, called Bitcoins. There is a finite supply of 21 million Bitcoins and the value of these is set by the natural market, organically. The system will automatically regulate itself as the userbase and demand increases to ensure minimal inflation and steady growth.
Bitcoin is Public
There are no secrets, and everything is public record. This is something that government and private agencies do not do and many are of the opinion that this is how we as humans are kept in a constant state of economic or financial slavery. The members can see exactly how the valuation of the currency works and the way it is programmed to benefit the users and not simply bring profits to a third party.
With Bitcoin, counterfeiting is impossible as there is a set number of the currency in the system and valuation is automatic and as mentioned organic. In an interview with Roger Ver, a Bitcoin investor, he mentioned the idea of counterfeiting when he criticized the traditional currencies we use while saying: “When you or I counterfeit money, we go to jail for counterfeiting, when central banks do it, they call it fancy names like quantitative easing or economic stimulus. With bitcoin that can’t happen. There’s a fixed supply, there will never be more than 21 million bitcoins and that’s a fantastic benefit over traditional government issued currencies”.
The way this public record works is by using the computing power of the individual users. This program is called Blockchain. With this much power behind the database they claim it makes fraudulent purchases very difficult. Users can even earn Bitcoins by participating in making the system even more powerful.
Bitcoin is Self-Regulated
Unlike the other online payment systems and gateways or even Western Union, there is no business looking to profit in any way from the individual transactions. Thus, transactions using Bitcoin are completely free. Yes, you heard right you can send money from anywhere to anywhere completely free of fees. Another great benefit is the fact that it is impossible to have your account frozen or seized, it is yours.
Furthermore, there are no limits on the amounts that can be sent. Finally there are no chargebacks when using Bitcoin. So once you have been paid you know the money is yours and you never have to worry about any of it ever being taken away such as the methods with traditional bank accounts or credit cards. Fans say that it is the best form of currency ever developed as it is finally the only one regulated by its users collectively and as a community for the benefit of the users, and this is the reasons governments the world over are hating Bitcoin, it takes the profit and control out of their hands and empowers the people.
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