Bitcoin can be described as a new currency that was created by an unknown person who used alias Satoshi Nakamoto in 2009. Its transactions do not need any middle men or banks. Persons using this currency also do not have to use their real names and there is also no transaction fee. The currency is slowly gaining popularity as many merchants accept them. It can be used to buy pizza, webhosting services and manicures among many others.
How they are used.
Bitcoins are stored on the users’ computer or in the cloud in a “digital wallet”. This wallet is a type of virtual bank account that allows individuals to receive or send the coins, save money or pay for products. It’s important to note that the wallets are not insured by FDIC.
How they are purchased.
You can purchase bitcoin through a number of avenues such as:
Various market places that are known as “bitcoin exchanges”. These allow people to sell and buy the currency using various currencies. The largest exchange is known as Mt. Gox. Transfers- people can send each other the coins using a computer or mobile apps. This is similar to sending money digitally. Mining- individuals can also compete to “mine” the coins using computers to solve some complex math puzzles. This is how they are created in the first place.
How they are anonymous.
Despite the fact that each bitcoin transaction is normally recorded in a public log, names of both the sellers and buyers are never revealed. Only the wallet IDs are revealed. This keeps the users transactions private and it also lets them sell or buy anything without the transactions being easily traced back to them. For this reason it has become a popular choice for people buying drugs online and taking part in other illicit business.
There are a number of benefits associated with bitcoin such as:
Payment freedom- it’s possible to receive and send money in any corner of the world instantly without dealing with borders, bank holidays or limits. This allows users to be in full control of their money.
Very low fees- currently the payments are processes with no or very small fees.
Fewer risks for merchants- transaction using this currency are irreversible, secure and do not contain the customers’ personal or sensitive information. This protects merchants from fraudulent chargebacks.
Control and security- the transactions offer great protection against identity theft and the users cannot get imposed or unwanted charges as they are normally in full control of all the transactions.
Neutral and transparent- all the details about the currency are available in the block chain in real time for anyone to verify. No organization or person can manipulate or control the transactions as they are cryptographically secure.
Some of the disadvantage of the bitcoin is:
Not widely used- the degree of acceptance is still low as there are very many people who do not know that it exists. Volatility- the number of businesses that use the currency as well as the value of bitcoins in circulation is still very small. This could imply that volatility could decrease as technology and markets decrease. The world is not used to start up currency thus it may be challenging to understand how it would work. Ongoing development- the currency software is still in beta with incomplete features in regards to active development. New features, services and tools are in construction to make it more accessible and secure to masses.
There are high hopes that the price of bitcoin will stabilize in the future as it has been stable for very many months now a trend that actually shows that it may be too volatile to be in mainstream use. This is despite the fact that is most of the time unregulated but who knows things might actually change. Governments are more concerned about taxation and the issue of control over the currency.
How they are used on online black markets
Bitcoin is also being used as a preferred mode of payment in the black market. This was hailed by the administration of the Silk Road Black Market who said that it was being used as a key to make its illicit business possible. However people should note that using the coins to get drug online is not an easy task.
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