Bitcoin 101: Have you heard about Bitcoin? I know there’s a 90% chance you’ve come across the word Bitcoin. But for people who have never heard of Bitcoin or have heard of it but don’t really know what the buzz is all about, after reading this article you’ll understand the basics of Bitcoin, how it works and why you need to start acquiring Bitcoin now!
In 2008 someone or some group of people with the alias Satoshi Nakamoto released a whitepaper, that whitepaper contained details of a new virtual currency they just created, they called it Bitcoin.
In that whitepaper they explained the advantages of this new currency over the traditional fiat currency and how the world can benefit from adopting this digital currency called Bitcoin.
When Bitcoin was first introduced to the public (2009) it was released as an open source software where programmers worldwide can work on the source code to create better version of the software. This group or person called Satoshi Nakamoto whose identity is one of the greatest mysteries of the 21st century created something so powerful then not even him predicted it would have the type of impact it has today.
Bitcoin has become so popular in recent times and it’s only fair we educate the new birds about this exciting technology. In this article we will tell you what Bitcoin is, how Bitcoin works, who controls it, the features of Bitcoin, and the pros and cons of this wonderful digital currency.
WHAT IS BITCOIN?
Bitcoin basically is a digital currency or better yet a decentralized peer-to-peer network of currencies which is used and distributed electronically. To explain it in simpler terms Bitcoin is a digital money system that allows people send money or tokens across the internet without going through a bank or a middleman.
Bitcoin is money, but unlike your local currency it can’t be printed into paper money – it is minted. Infact the total number of Bitcoin that will ever be created is pegged at 21 million Bitcoin.
HOW DOES BITCOIN WORK?
The workings behind the scene to process a Bitcoin transaction is one of the greatest invention in technology. A Bitcoin trader or investor only sees the amount of Bitcoin in his Bitcoin wallet, but do you really know what happened behind the scenes before that Bitcoin appears in your wallet? No you don’t because you only think about yourself (lol). But seriously what goes on behind the scene? That’s what we will be talking about in this section of the article.
The Bitcoin network was built on top the blockchain – a distributed ledger that stored transactions in a unique and security tight manner. The blockchain is the framework where Bitcoin was built on.
On the blockchain digital transactions are combined and turned into blocks, the more transactions carried out on the blockchain the more blocks are created to form a chain like structure; that’s where the name blockchain comes from.
Let’s day for example someone tries to alter some records in a block of different transactions, it will automatically affect all other blocks, that’s why its so difficult to carry out fraud on the blockchain that houses Bitcoin.
Once a Bitcoin transaction is initiated in the blockchain the user wallets verifies the validity of that transaction, remember every wallet has a unique address where your Bitcoin can be sent to, it is like having a bank account number where your r local currency is sent to.
So when someone somewhere wants to send you Bitcoin, they just have to input your wallet address and send you the amount of Bitcoin agreed. The Bitcoin is sent directly to your wallet without passing through a bank or third party, your wallet verifies the transactions and in some minutes you receive your funds directly in your wallet- it’s that simple.
WHO CONTROLS BITCOIN?
We all know Bitcoin was created by an unknown Satoshi Nakamoto, who people believed was Japanese till recent research said he couldn’t be Japanese because his English was too perfect to be Asian and his software was not even labelled in Japanese. Since then lots of Bitcoin evangelists have been rumored to be the brain behind this groundbreaking technology, but they’ve all denied to be Satoshi Nakamoto.
So who’s Satoshi Nakamoto or an even more dramatic question, who’s in control of Bitcoin. For this particular question we’ve had a lot of answers, good answers, intelligent answers and some downright absurd and really funny answers. Some religiously inclined Bitcoin critic have at one point suggested Bitcoin was controlled by Satan (that would be some really impressive technology by Satan, although I don’t think he can pull it off, he’s not even a programmer!)
It is rumored that in 2010 Satoshi moved on to other interesting stuffs and left Bitcoin in the hands of some prominent members of the Bitcoin community (although his Bitcoin assets was valued at 1 million Bitcoin). He also named Gavin Andresen as the lead developer for the Bitcoin platform.
The first thing Gavin did after he was handed the role as too man was to decentralize Bitcoin further so no one will be considered the owner of this wonderful technology. He wanted Bitcoin to be self sufficient and exist in its own even if one day he got hit by a bus (which is very unlikely).
This means today Bitcoin isn’t controlled by anyone but by everyone (true decentralization). That’s the advantage Bitcoin has over local currencies. It is independent of government control, bank and control from large corporations, this is a currency for the people – it’s not been controlled by anyone.
MAJOR FEATURES OF BITCOIN
What really makes Bitcoin unique and the groundbreaking technology it is? The features – Bitcoin possesses one of the most amazing features for any tech platform out right now. The features of Bitcoin includes
Anonymous: One beautiful feature of Bitcoin is its anonymous nature. As opposed to banking policies where they have customer information on their finger tips from credit history to phone numbers Bitcoin offers complete anonymity. All your information doesn’t need to be in the public eye or stored and monitored by unknown people.
Your Bitcoin wallet unlike bank account number doesn’t need to have your personal information, you maintain complete anonymity which is what most people want, power to have control over their own data. Some people may argue against this – saying it has disadvantages but we all agree this feature makes it stand out.
Decentralized: The main reason for creating Bitcoin or blockchain technology in general was because Satoshi Nakamoto believed the financial architecture needs to be decentralized. No central authority or government should be in charge of anyone’s funds.
The Bitcoin network is designed in such a way that everyone involved – from miners to nodes are part of this gargantuan network – a decentralized network with servers hosted in different parts of the planet.
This means if one server in the vast network goes down the network can continue to operate smoothly without any interference as opposed to centralized systems where the failure of one server means operations will be stopped for hours or days sometimes.
Fast: The Bitcoin network is extremely fast, that’s one of the main features of the network. The Bitcoin network processes payments in minutes – let’s say you’re transferring funds from Kenya to a business partner in China it takes them minutes to receive your funds while bank transfers will take hours or even days before your funds can get to your client.
Transparent: Bitcoin is anonymous we know that, but it is also transparent. This is because every single transaction that’s happened on the blockchain is stored on the blockchain. This means every single transaction that’s happened on the platform can be tracked and looked into, even the amount send and the wallet address that sent it.
But tracing the transaction to a particular person is still near impossible though, but the process is very transparent. So if you want to remain totally anonymous on the blockchain then you have to use some unique Bitcoin wallet that focuses mainly on security.
PROS OF BITCOIN
It can’t be counterfeited: Unlike traditional currency Bitcoin can be very difficult to counterfeit. One way to counterfeit Bitcoin is using that same currency twice and this will render both transactions as fake on the blockchain. This is basically called Double Spend. To stop this action blockchain technology uses different consensus algorithm to stop this issue of double spend, this is one advantage of using Bitcoin.
Safe: Using Bitcoin is considered safe when compared to the banking industry in Africa. With Bitcoin there’s a low possibility that your funds can be withdrawn from your wallet as opposed to the recent spat of attacks on bank accounts in Africa where funds has been illegally withdrawn from accounts without permission from the owner.
Bitcoin uses cryptography to encrypt users wallet and information, your funds is virtually safe from been attacked.
Freedom: One of the greatest advantages of Bitcoin is the freedom it gives its users. Bitcoin was created with the aim of giving freedom to its users. Freedom from government imposition and third party bureaucracy. You can send and receive funds directly to your wallet as you deem fit and can purchase whatever you want online without interference from anyone- total freedom!!
CONS OF BITCOIN
Volatility: One major disadvantage of owning a Bitcoin is the price volatility of this digital currency. You can wake up today and see the price of your Bitcoin up and int he next minute the price of Bitcoin might have fallen drastically.
These ups and downs in the price of Bitcoin is called Bubbles and busts in the price of Bitcoin – a prolonged plummeting of price is called a bearish market while a prolonged rise in price is called a bullish market.
Legalities: This reason is why governments of some countries have banned the use of Bitcoin in those countries. Some countries encourage the use of Bitcoin though, but many oppose the use because they believe it appeals to criminals because it provides anonymity. Lots of terrorists, drug dealers and child traffickers are known to prefer transacting in Bitcoin to protect their identity.
Recognition: Another disadvantage of Bitcoin is that it hasn’t really gone mainstream since it was created. There are some stumbling blocks that’s held it down from going mainstream since 2008.
In some countries, major businesses and even small business are completely in the dark concerning Bitcoin, this is the reason it hasn’t received the recognition it deserves and that is why Bitcoin hasn’t hit its true potential.
Bitcoin is one of the best inventions and investment opportunities of the 21st century. It has completely revolutionized and impacted on the financial economy of the world and this guide has helped you understand what it’s all about – which is our mission at MyCryptoAfrica (to educate the African continent about Bitcoin and blockchain technology).