You don’t have to be ultra tech-savvy or even always “tuned in” to what’s trending in the Internet world to hear about bitcoin; you may also have friends or colleagues who use it as their preferred currency.
The popular cryptocurrency is gaining momentum, but many interested users are still unsure of what it is and what place (if any) it will have in the future. Before you decide whether to try it out or avoid using it altogether, we will tell you everything you need to know about the virtual currency.
The Bitcoin Basics
We will take an in-depth look at one of the most popular cryptocurrencies, but first, it’s important to start with some of the basics of bitcoin. Even though we hear about it a lot, it can be difficult to understand. Why use money if you don’t know how it works?
You’ll hear the term cryptocurrency used frequently; this simply describes a digital or virtual currency (unlike tangible money like paper dollars and coins); it’s not uncommon for these terms to be used interchangeably.
When you use cryptocurrency, it stays on the Internet. You may see it depicted as a gold coin or some other form of currency, but that’s to help us, as consumers, get a better grasp on the fact that it is money.
Installing Your Digital Wallet
The first thing you need to do is install a digital wallet; this is typically stored on your computer or mobile device (whichever you will use to make transactions). When you install your wallet, it generates a bitcoin address, which you will use for making payments (you get a new address each time you make a payment or accept money).
Each wallet comes with a private key (or a seed) which acts as a signature for transactions. Not only does the key authorize a transaction but it can keep the transaction safe from being altered.
You’ve probably heard a lot about blockchain but know little about how it works. If you’re unfamiliar with blockchain, it’s an online shared public ledger that records and validates peer-to-peer payments. All transactions, which are confirmed by miners, are included in the blockchain.
Only miners can confirm digital currency transactions, and they use a distributed consensus system which keeps transactions in chronological order in the blockchain and prevents individuals from adding new blocks in the blockchain; transactions remain fair and organized. Miners also keep the transactions moving smoothly and quickly.
Virtually anyone can become a miner if they have the right software programs and computers to mine (and create) more of the popular cryptocurrency. Mining is somewhat of a “computational race,” and the winning miner (who typically has the fastest computer) gets a substantial chunk of the currency.
Where Do You Spend It?
Although there are many major retailers that won’t accept the cryptocurrency yet, there are over 100,000 companies, from airlines to hotels, that will gladly take your digital money. Some services will allow you to buy gift cards to major retailers with cryptocurrency and others can help you convert your bitcoin to USD or Euros.
How Does It Differ From Other Online Payments?
If you’re like most consumers, you probably use a debit, credit, or prepaid card to pay for all of your online purchases and even those in a brick and mortar establishment. Most people shop online because it’s convenient, often more affordable, and relatively safe.
You might be wondering people bother using digital currency when the method of payments that we already use seem to work just fine. One of the main differences between cryptocurrency and other payment methods is also one of the major benefits: a secure transaction.
Another plus to using digital currency is that it cannot be counterfeited like “real” currency and it remains relatively safe and legit with the use of blockchain, which means it’s nearly impossible for double-spending to occur.
An additional difference and benefit of cryptocurrency? You don’t have to worry about transaction charges, exchange rates, and interest rates. Unlike credit card companies and other methods of payment, there’s no “middleman” who gets a percentage of your money.
Are There Risks?
While anonymity is a plus when using bitcoin, it can also be an attractive feature for people who want to use digital currency for illegal activities (this may or may not affect you as a cryptocurrency user).
One of the most significant issues that are a cause for concern is the rise and fall in the bitcoin value. Some estimate that the digital currency processes around $2 billion worth of transactions per day but we’re likely to see that number continue to fluctuate as long as the currency is in circulation.
The change in bitcoin prices might be due to a variety of reasons, such as the IRS calling it an asset for tax purposes.
Another thing to keep in mind about using bitcoin is that once you spend, it’s gone. It doesn’t matter who you send your digital currency to; whether it’s a friend or a fraud, you can’t get your money back. In many ways, cryptocurrency is like gambling and the stock market, so it’s best to be prepared for the good and bad.
The Future of Bitcoin
The cryptocurrency has come a long way since its inception in 2009. Although it’s difficult to know, for sure, if the most popular cryptocurrency will continue to lead the way in the future, there’s a good chance it will be around for a while yet.
Will Creation of Bitcoin Cease?
Once 21 million bitcoins are created, there will be no more new ones. Some experts expect this cap to occur by or around 2140, so if we’re basing the future on this factor alone, the digital currency should be in circulation until the cap is met.
Will Bitcoin Become Less Popular?
Other crypto coins are competing to dethrone the most popular digital currency, but for right now, a lot depends on the fluctuating prices and value of the currency. As long as it remains the most popular type of cryptocurrency, it will continue to hold the most value.
As more merchants accept digital currency as a form of payment, more consumers are likely to use it as their preferred method of payment, particularly as the threat of identity theft remains when using a debit or credit card when shopping online.
As long as the most popular cryptocurrency retains value and doesn’t drop too much, there’s a good chance that we will see more people investing and trading with the currency.
Are Regulations and Risks Part of the Future of Bitcoin?
As stated earlier, one of the major benefits of using the cryptocurrency over a traditional method of payment is having control over your money. Not only do you not have to pay any fees, which are often associated with other methods of payment, but you can send it directly to the person you want to pay (no middlemen).
Having more control over your money may come at a cost in the future. Currently, the popular cryptocurrency is primarily unregulated, particularly in the U.S. Don’t be surprised if you see more regulations in other countries and if tax rules are changed to include the digital currency.
While the currency is nearly impossible to replicate and seems to be safer than traditional methods of payment, there may come a time when it becomes just as risky to use as other currency, such as credit cards.
Protecting Your Bitcoin In The Future
The more widely used it becomes, the popular cryptocoin might become a frequent target for hackers. While safeguarding money that you cannot see or hold can be difficult and frustrating, you can keep it safer by having the right digital wallet (like a “cold” wallet) and take similar precautions that you would with other sensitive tech information.
If you haven’t opened an account to start using the digital currency, it’s important to understand what you’re doing before you even set up a wallet. After the initial set-up, store your private key (or seed) in a safe place that’s offline and out of sight from others. Always have a strong password and a unique email address.
Regardless of which digital currencies you decide to invest in, it’s essential to stay up-to-date on everything from the value of the currency to any controversies or threats surrounding it. Not only will this help you keep your currency safer but you’re less likely to lose money in the long run.