Bitcoin is an electronic currency or a digital asset. That means this virtual currency exists online only, but people describe it as an electronic combination of gold and cash. However, Satoshi Nakamoto created Bitcoin hoping that people would spend it like cash. But this digital currency holds value like gold. Nevertheless, Bitcoin is digital, and this differentiates it from gold or money. In 2020, Bitcoin set a new record, prompting more people to think about investing in it.
Bitcoin Definition
Bitcoin definition describes it as two things.
These are:
- Digital asset: As a digital asset, Bitcoin refers to digital coins. Satoshi Nakamoto capped Bitcoin supply at 21 million. That means there will never be more than 21 million bitcoins.
- Bitcoin network: As a network, Bitcoin refers to the blockchain, the technology behind this virtual currency. It’s what gives this digital asset practical applications and value.
As an asset, Bitcoin is a digital coin abbreviated as BTC. Although it’s like the other coins, it’s completely digital. Miners create coins gradually, and people can collect, spend, and trade them like fiat money. For instance, you can purchase bitcoins at a crypto exchange like cryptotrader.software and then send them to your digital wallet. Upon sending Bitcoin into your wallet, you can send them to somebody else or use them to pay for services and goods.
Why People Purchase Bitcoin
Demand and supply influence Bitcoin prices. This virtual currency is worth the amount that somebody else is willing to pay to acquire it. Here’s why more people want to purchase this digital currency.
- Payments: Some people buy Bitcoin because they want to use virtual currency to pay for goods or services. Bitcoin payments are faster and cheaper. For this reason, most people opt to complete international payments using Bitcoin.
- Speculation: Most people think Bitcoin’s price will continue to increase. As such, they purchase bitcoins and hold them in their digital wallets hoping to sell them later for profits.
- Economic diversification: Some people think the Bitcoin network’s design means it’s a secure currency than government-issued money. Thus, they are concerned about fiscal policies by their governments and elements like national inflation and debt that can devalue the government’s money. Such factors can’t affect Bitcoin.
Some investors see Bitcoin as a worthwhile addition to their existing portfolios/that’s because commodities, forex markets, and stock markets are closely interconnected, and all can fail at once.
How it Works
Bitcoin uses blockchain technology to facilitate and record all transaction data. On average, every block occurs every 10 minutes. Once this happens, the Bitcoin network validates the transaction automatically while sending payments to the recipients. The network records the details of every transaction in a public ledger. This system transmits the latest ledger version on the blockchain, including the transactions.
Ideally, the Bitcoin network compares to a payment robot. People send Bitcoin through the network without involving third parties like banks.
Since this system is a robot:
- Nobody can steal your money
- You won’t pay higher fees to pay with Bitcoin
- The Bitcoin network never lies
- It won’t make mistakes or fudge numbers
The Bitcoin system gives this digital currency its value. That’s because it’s automated to maintain impeccable records. What’s more, blockchain technology makes it different for people to counterfeit Bitcoin. Additionally, the world will never have more than 21 million bitcoins, increasing this digital asset’s value.
Final Thoughts
Bitcoin is a successful virtual currency that you can purchase on crypto exchanges and even pay for services and goods using it. The technology behind this electronic money makes it valuable while attracting more investors and traders. But before you start trading or investing in Bitcoin, take your time to learn about it. That way, you will make more informed decisions and ensure your safety throughout the investment or trading process.
