Bitcoins Going Big

Bitcoins Going Big

According to businessinsider, the price of single bitcoin has hit $10,000 – a 1000 percent rise since the start of the year. In 2010, with 10,000 bitcoins ($40) you could afford just 2 pizzas, but today those 10,000 bitcoins are worth a staggering $100 million.

So, if you think bitcoins are meant for the dark web and have no place in the real world, think again. Today, bitcoin blockchain is the biggest with total value reaching $96.7 billion.

In 2010 you could buy 2 pizzas with 10,000 bitcoins

May 22, 2010 – 10,000 bitcoins was worth $40 or worth 2 pizzas

November 28, 2017 – 10,000 bitcoins are worth $100 million.

Here’s a complete lowdown on this digital currency that’s gaining unstoppable momentum in the recent times.

Bitcoin – The Origin

Bitcoin, one type of virtual currency, was created in 2008-2009 by an individual or probably by a group of individuals, known as Satoshi Nakamoto.

Created through computer codes, the cryptocurrency is primarily used for making electronic purchases and transfers.

Currently, bitcoins are being used for paying friends, businesses and more. But as aforementioned, in some parts of the world, bitcoins are also be used for buying pizzas.

The most noteworthy feature of this digital currency is that each and every purchase is recorded digitally on a transaction log, along with the time of the purchase and who owns how much.

In fact, every single transaction gets recorded in the transaction log. And this digital transaction log is popularly referred to as *Blockchain. *

The blockchain keeps a record of every single transaction (present and past) and of every single bitcoin in circulation.

Additionally, people called miners are appointed, whose only job is to supervise the authenticity of the transactions and to make updates every time a new transaction happens.

In other words, it’s the miners’ responsibility to vet every transaction that’s entered in the transactional log. For their special services, miners are paid a small fee by vendors (for every transaction) in the form of newly minted bitcoins. Currently, miners have rewarded 12.5 bitcoins.

Bitcoin's Dark web days

Today there are 16 million bitcoins in circulation.  According to the Bitcoin standards, only 21 million bitcoins can ever be created by miners.

These coins, however, can be further divided into smaller parts, called as “Satoshi” named after the founder.

How bitcoins work?

For a bitcoin transaction to begin, a process called ‘mining’ take places.  The process starts with a computer solving a difficult mathematical problem with a 64-digit solution.

As and when a problem gets solved, one block of bitcoin is processed and added to the chain.

The miner, in turn, gets rewarded with a new bitcoin for solving the mathematical puzzle.

However, to receive a bitcoin (or for transferring them), it is imperative for the users to have Bitcoin Wallets with addresses (attached to a public key and private key) in it. This is the basic requirement if you need to deal in bitcoins.  You can create a wallet easily through an online application. Or you can download it on your phone, personal computer or on the web through a software wallet.

This address, stored inside the wallet, consists of a string of 27-34 letters and numbers that acts a virtual post box.

And given that there’s no register of these addresses, people can transact anonymously.

Let me explain with an example:

  • Mark’s online store accepts bitcoins as payments.
  • Mark is selling a cupboard worth $2000. And given that the current value of a single bitcoin is worth $500, he decides to sell the cupboard of 4 bitcoins
  • Jacob, while scouring the website for cupboard, stumbles upon Mark’s website
  • Jacob at once creates a new bitcoin address in his wallet. He sees Mark’s public bitcoin address displayed on his website
  • Jacob doesn’t have to disclose his identity to Mark and only needs to instruct his Bitcoin client (Bitcoin software on his computer) to transfer the money from his wallet to Mark’s public address.
  • Jacob’s bitcoin client will sign the transaction request electronically with the private key of his address from where he transfers his bitcoins. Jacob’s public key is available for signature verifications.
  • The transaction is broadcasted to the Bitcoin network and will be verified by miners in 10 minutes or so. The 2 bitcoins have been successfully transferred from Jacob’s address to Mark’s address.
  • A bitcoin user is free to share his public address with almost all. However, his private address, however, is meant for him only. This is what makes Bitcoin a secure payment system.       

The acceptance of bitcoins in business payments    

No doubt, bitcoins are picking steam, though it’s speculators who are minting money by trading in bitcoins – that is purchasing bitcoins at lower rates and selling them at a higher rate. You can liken it to the trading that happens in the foreign exchange.

bitcoins for business payments

Notwithstanding the large-scale use of bitcoins by speculators, it’s gaining acceptance in the business world as a form of payment.

Several big companies such as WordPress, Overstock.com, Reddit, HP IBM, and Intel are already dealing in Bitcoins or have expressed interest in this virtual currency. In fact, several banks are gearing up to use this currency.  Over $1.5 million of bitcoins are in circulation currently, fueling millions of transactions.

Long story short, businesses and individuals are getting a hang of this technology and becoming aware of its best uses over traditional money.

How are bitcoins priced?

Given that there’s no centralized exchange system monitoring the exchange of bitcoins, the value of bitcoins has fluctuated significantly and reached a record high in the recent years.

Their fluctuation depends on the supply and demand in the marketplace. Basically, when bitcoin exchanges hands, from seller to buyer, the two parties have to agree on a given price.

That doesn’t mean the seller is free to quote a price that’s convenient for him. On the contrary, the seller has to calculatedly quote a price that’s not only fair but is in accordance with the value traded in the marketplace.

In 2013, bitcoins’ value skyrocketed by 10,000 percent before it crashed.

In September 2016, a single bitcoin was being traded for around £469.

According to currency tracker XE.com, in October 2017, a Bitcoin was traded for more than £4,000,

The reason for these fluctuations is that there’s no centralized bank printing the currency and deciding on the values.

virtual wallet of Bitcoins

You can set up a virtual wallet on the internet to keep your bitcoins

Countries accepting bitcoins

  • U.S.
  • UK
  • Canada
  • Australia
  • Finland
  • Estonia
  • Denmark
  • Sweden
  • South Korea
  • The Netherlands

Bitcoins versus regular currency

Why use bitcoins? When everyone is so comfortable using the regular currency, won’t bitcoins complicate our already complex lives?

For the starters, bitcoin offers an array of benefits as compared to traditional currencies. Say, for instance, you want to buy things worth $1000 from a seller. But then, the seller wants money in pure cash, no cards or bitcoins.

For the buyer finding hard cash is not an easy task. But then he manages somehow. But then the seller is not happy receiving it because he doubts the authenticity of the notes, whether they are counterfeit or not. This is where bitcoin comes into the picture.

If the seller and the buyer both agree to transact using bitcoin that is by converting $1000 to bitcoins, the entire transaction could be completed ASAP – maybe in 10 minutes or so.

I know, what you are thinking now. What if the buyer agrees to pay via a credit card?

In that case, as you know, both the buyer and the seller will have to pay 2-3% transaction fee for every credit card transaction that happens, be it through Visa, Mastercard or American Express. In the case of bitcoins, there are no such fees involved.

The point I am driving home this:  If the buyer and a seller decide to transact via bitcoins, the transactions would be highly transparent, and the two parties would be in full control.  They don’t have to take into account the credit limits imposed by credit card companies. The buyer doesn’t even have to worry about the additional fees the seller might charge from him.

Every single transaction is processed only after it has been agreed by both parties.

The biggest plus point of bitcoin is that all the information is public and transparent.  And the entire bitcoin network is notified about each and every transaction.

What’s more? Both the buyer and seller don’t have to worry about the validity of the transaction or even feel cheated, given that it gets recorded in transactions logs and are regularly processed and updated by miners.

From where can you procure bitcoins?

There are three different ways to get bitcoins:

When selling goods you can accept bitcoins as payment

You can trade bitcoins in exchange for traditional currencies of different countries.

Purchase and selling of bitcoins are possible via Bitcoin exchanges. Japan-based Mt. Gox is the said to be the largest Bitcoin exchange. Launched in July 2010, the exchange was handling 70 percent of the transactions by 2013.

People can also send bitcoins via mobile apps and computers like they send currency.

 

Westcoin Bitcoin Exchanges

Image source: https://news.bitcoin.com

Final Thoughts

Several moves are being made to bring the alternative currency to the mainstream. Today, not just businesses, even educational institutions in the U.S. have started accepting bitcoins. The general acceptance of this currency has led several companies to consider bitcoins as a genuine investment opportunity, which could further pave its way to the mainstream.

However, it’s still too early to predict whether cryptocurrencies will have a widespread acceptance in the coming years. But then, techno-savvy individuals are going to lap it up for sure. Interested in investing in cryptocurrency startups, check out bestcoins.co for the same. The startups are segregated category wise, from real estate, machine learing, AI, content management to supply & logistics. Take your pick.

 

Jini Maxin

Jini Maxin

Jini Maxin is a prolific tech writer who’s constantly juggling and struggling to keep pace with the Usain Bolt’s of the cryptocurrency world, who are leaving no stone undisturbed to make cryptocurrencies the commoners’ currency in this digital era.