Understanding Bitcoin as a Payment System

The first time the word “Bitcoin” was mentioned was in August 2008. A programmer or group of individuals with the name Satoshi Nakamoto introduced the word bitcoin when they registered the new domain bitcoin.org. Later in October, the white paper for Bitcoin was released by Satoshi Nakamoto which was titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”

The white paper describes Bitcoin as an electronic payment system that would finally get rid of a central authority while making all transactions secure and verifiable. It is a digital currency that enables “trustless” payments on the Internet. A good number of early investors who bought bitcoin have become millionaires as its value has increased over the years.
The identity of the individual or group of persons behind Bitcoin has remained a mystery after more than a decade of its existence. Several factors are responsible for the anonymous identity of Bitcoin’s inventor. Since Bitcoin has the potential to disrupt the existing banking and monetary systems, governments could be motivated to take legal action against the creator.

Privacy is also another major reason why Satoshi Nakamoto would want to remain unknown. The popularity of the digital currency has been on the increase over the years and this would also draw so much attention from governments and the media.

It is currently the largest digital currency in the world based on market cap but the road to its popularity has been turbulent. Despite the challenges it has faced, bitcoin has not only come out stronger but has further inspired the creation of over two thousand cryptocurrencies.

The word Bitcoin could actually mean two different things. It could be the bitcoin token which is the native currency of the Bitcoin ecosystem. You can buy and carry out various transactions with it and to purchase it, you can use exchanges such as Binance, Huobi, Coinbase, Kraken, etc.

The second has to do with Bitcoin protocol and this is the technology behind the crypto also known as blockchain or distributed ledger technology. Companies such as IBM and JP Morgan have already embraced blockchain technology.
The supply of most of the existing fiat currencies such as the euros, dollars, and yen, is controlled by central banks. So, they can print as many units of these currencies as they desire and even try to manipulate the value of their currency. Unfortunately, those who bear the cost of such manipulations are holders of the currency, especially the citizens.
But one of the features of Bitcoin that has eliminated the need for central banks has to do with its supply. The supply of Bitcoin is strictly controlled by its underlying algorithm and a small number of new coins are mined every hour. This number will continue to reduce in the coming years until all 21 million bitcoins have been mined. This is one of the striking features of Bitcoin that makes it a more attractive asset. Remember, with an increase in demand while supply stays constant, the value of an asset will appreciate.

Features of Bitcoin

Bitcoin has several features that make it quite different from traditional money we all know:

It is decentralized and completely independent of the influence of governing authorities.

Transactions are irreversible once they have been confirmed, not even the sender, banks or Satoshi can reverse the transaction.

Privacy is another excellent feature of Bitcoin. Most banks and financial institutions are aware of virtually everything regarding their clients — phone numbers, spending habits, Well, bitcoin is pseudonymous since it can conceal the personal information of users. Bitcoin transactions as well as accounts are not linked to real-world identities. The only way to receive Bitcoins is via a public address that contains about 30 characters. However, it’s still possible to trace those involved in a transaction via the wallet address.

Bitcoin transactions are transparent, fast and global since the transactions are propagated almost instantly and confirmed within a few minutes. The confirmation of various Bitcoin transactions is executed by a global network of computers and this helps to ensure that anyone in any location around the globe gets the coin almost immediately after it is sent. However, the surge in the value of Bitcoin has also increased the time needed for transactions to be confirmed.

So, what can you do with Bitcoin?

With bitcoin, you can purchase theatre tickets, fly airlines like Air Lithuania and even grab yourself some bottles of craft beer and several others. The list keeps increasing even as more Bitcoin ATMs are being provided now. You will find more information about Bitcoin and over a hundred different cryptocurrencies by reading the book “The Digital World of Crypto Riches.” It’s always better to do your own research before investing in any cryptocurrency. The crypto market is extremely volatile and you shouldn’t get involved without having a good knowledge of the cryptocurrency projects you would like to buy.

Some experts believe that Bitcoin has the potential to replace gold since it is more a durable mechanism for trade when compared to gold. Passing a bar of gold around is bulky but we can easily send Bitcoin as payment for goods and services by simply scanning a barcode or sending it via a wallet address.

JP Morgan actually believes that Bitcoin has what it takes to compete with gold as an alternative currency and they believe that millennials are a major force that has been accelerating the adoption of bitcoin and this will ensure that the digital currency doesn’t just serve as a means of payment but also a store of wealth. According to JP Morgan, “A modest crowding out of gold as an ‘alternative’ currency over the longer term could eventually lead to the doubling or even tripling of the price of Bitcoin.”

Initially, it wasn’t clear how and where we could use Bitcoin when it was introduced in 2009. But today, things have changed because major corporations such as Dell and Microsoft now accept BTC as payment for some of their products.