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What is bitcoin?

What is bitcoin?

Last updated 12th Apr 2022

You may have heard the term bitcoin before, but not understood what it meant. Bitcoin is a type of digital currency which is created electronically and kept that way too. There is no one who controls bitcoin, it is created by people and businesses all over the world. They are within a category of currency known as cryptocurrency.

The difference between other currencies and Bitcoin is that bitcoin is used to buy things electronically rather than physically. There is no central authority which controls the making and trading of bitcoin, it is run by the people who have them. This is the main difference between this type of currency and the conventional dollars and pounds we use each day.

Who made it?

Satoshi Nakamoto was the software developer who first proposed bitcoin: and he based the currency on the idea of it being free from any central authority and transferred with very low transaction fees to anyone around the world within seconds.

You might think that everyone in the world could just go out and create bitcoin themselves to buy things, but that goes against the rules of the bitcoin community. Currently, there can only ever be 21 million bitcoins in the world. These coins, like dollars or pounds, can be split into smaller counterparts. The smallest portion of a bitcoin which can be made is a one hundred millionth, which is called a Satoshi in honour of the creator.

Why is bitcoin valuable

Unlike the currency we use every day which is based on gold or silver, bitcoin is based on mathematics. There is a particular mathematical formula which is used to create this type of currency and the formula is open to anyone in the world to access if they want.

How much is it worth?

At the time of writing this post, one bitcoin is equal to $17,317.17. This changes each day with exchange rate just like every other currency but you can check the value by searching it on google.

What are the main characteristics of a bitcoin?

1. It’s decentralized

The main unique factor of bitcoin compared to the other currencies we know in our everyday life is that they are not printed by anyone, controlled by anyone or owned by a bank. This is the reason that bitcoin is becoming so popular. It means that a central force cannot control the money you have, it is yours and yours alone to do whatever you want with. There are machines which mine bitcoin and these all make up one giant network- this means that everyone has a equal right to bitcoin and equal power. Even if the network goes down, the cash will keep flowing.

2. It’s simple

It can be really difficult and complicated to join a bank. They ask you tonnes of questions about yourself, your situation and make you fill out loads of forms. However, setting up a bitcoin address is almost instant, and you won’t have to pay any fees for the service.

3. It’s anonymous

Because bitcoin addresses don’t correspond to names, people can mine and own bitcoin anonymously and safely without the risk of being found and threatened by someone who wants them.

4. It’s honest

Unlike some big banks, the whole point of bitcoin and bitcoin mining is to be open, honest and transparent at all times. Every bitcoin transaction is recorded and put into one place called the blockchain. It details the trading, splitting and creation of every bitcoin in the world, as well as detailing the people who currently hold them. While they will not know that it is you who owns the bitcoin address, they will see that your bitcoin address holds bitcoin. The only way to conceal how many bitcoin you truly own is to split them between multiple addresses.

5. Transaction fees are small

Bitcoin doesn’t charge you much at all for the transaction, even if it is overseas. The whole point of bitcoin is to make it as simple as possible for people to trade online.

6. It’s fast

If you send a coin from the USA to China, it will reach its destination in seconds. If you were to try and do the same with your local bank, it could take hours or even days for the money to transfer over.

7. It’s non-repudiable

You cannot get your bitcoin back once you have traded it. So whilst it is a great investment, you need to watch the market if you plan to sell up and make sure you are getting the best possible price for your bitcoin in the market.

News Desk

News Desk

The latest news, comment and analysis from our crypto news desk.