Posted On 08 Jan 2018
Other than marmite, very few things divide opinion across the globe as Bitcoin does. That’s mainly because only a small percentage of the population truly understands what it is. Some view it as an item that can only be utilized by the tech-savvy, while others believe it’s used for the wrong purposes. But, in fact, Bitcoin is just a virtual currency that creates anonymity.
It removes the need to use a bank to store money, it removes the need to attach your name to transactions, and it removes some of the risks of becoming a victim of fraudulent activity. More and more people are beginning to realize the advantages of this digital currency, and the increased popularity is correlated with the soaring prices amongst all of the digital exchanges.
Bitcoin is an entirely decentralized payment network, meaning it’s only maintained through a peer-to-peer network. Moreover, its currency – bitcoin – is just a set of numbers and letters which are stored on Blockchain technology. This means it doesn’t actually represent a conventional currency. Although, the fact that millions of people still purchase things with it shows that it could become an everyday form of money in the future.
If we use a more common example, it’s like PayPal enabling you to send and receive money, and then allowing you to withdraw your balance in a widespread currency such as the US dollar. However, Bitcoin is unique and doesn’t operate in that way whatsoever. As it’s a decentralized network, there’s no official method to determine what value the bitcoin currency possesses.
Therefore, it tends to mirror that of the conventional currencies and is influenced by the number of people who want it and the amount that is available—otherwise known as supply and demand. But, another difference is that it doesn’t give you the chance to withdraw it for use in the real world. Why? Because in reality, it’s not actually a genuine form of money, it’s software.
Bitcoin is just a line that has been recorded in the Blockchain ledger, and a set of digital keys stored in an offline or online wallet. So, while it’s advantageous to make payments online due to its strong security measures and anonymity, the disadvantage is not being able to transfer that into physical cash.
To put all of that into layman’s terms – the bitcoin currency is a digital replica of money, which keeps your identity hidden and allows you to make transactions on the web.