Bitcoin has risen in popularity lately but many people still don’t understand exactly what it is. Here’s everything you need to know about Bitcoin.
As reported by CNN Business, this week alone, Tesla (TSLA) said it will soon accept bitcoin as payment for its vehicles, and disclosed it had purchased $1.5 billion in the cryptocurrency as part of its cash holdings. Meanwhile, Uber (UBER) and Mastercard (MA) also said they plan to start accepting bitcoin. And BNY Mellon — the oldest US bank, whose history dates back to Alexander Hamilton’s founding of Bank of New York in 1784 — announced it has formed a “digital assets” unit.
So if you’ve been ignoring bitcoin thinking it might just be a financial trend, now’s the time to start paying attention. Here’s what you need to know:
What is Bitcoin?
Bitcoin, often described as a cryptocurrency, is a type of virtual money created in 2009 by an unknown person using the code-name “Satoshi Nakamoto”. It is basically a computer program designed to allow people to exchange value anonymously and with no brokers or intermediaries. Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer.
Why was it created?
Its intellectual and ideological origins are in the “cyberpunk” movement of the 1990s and early 2000s. At that time, people began talking online about a digital currency that could be used online without being tracked by governments or corporations.
Is Bitcoin really anonymous?
No, Bitcoin isn’t actually completely anonymous. Talented hackers and government agencies have the means to track pretty much anything, including Bitcoin. Although Bitcoin transactions are randomly transmitted over the peer-to-peer network (making it seemingly anonymous), this system doesn’t always hold up.
If a hacker can connect multiple nodes to the Bitcoin network, the combined data collected from these different nodes might be enough to determine where a transaction originated.
Bitcoins can also be linked to real identities if those identities are used in combination with the Bitcoin addresses in some way. This includes addresses used to deposit or withdraw money to or from an exchange or wallet.
How do you get Bitcoin?
There are three main ways people get Bitcoins:
- You can buy Bitcoins using ‘real’ money.
- You can sell things and let people pay you with Bitcoins.
- Or they can be created using a computer.
Coinbase is a leading exchange, along with Coinmama, CEX.IO and Gemini.
Where do you keep your bitcoin?
Bitcoin is stored in a digital wallet, which is either on the cloud or your computer. It’s like having a virtual bank account. But unlike bank accounts, stored bitcoin isn’t insured by the FDIC.
Why are Bitcoins valuable?
There are lots of things other than money which we consider valuable like gold and diamonds. The Aztecs used cocoa beans as money!
Bitcoins are valuable because people are willing to exchange them for real goods and services, and even cash.
Is Bitcoin safe?
The cryptocurrency is highly volatile, and therefore very risky. For example, in January bitcoin’s value rose to $42,000, fell to $30,000, then rose again to $40,000 — all in the course of one week.
And there some inherent dangers to a digital currency: A hacked server, a deleted file or a lost password could mean the funds are lost forever.