Bitcoins – What Are They And Why Are They So Important?

Illustration by Ariel Trawick.

We all hear about bitcoins and how they will be the next “big thing.” Well, it seems like they will be.

Bitcoin is a cryptocurrency, a type of currency that uses encryption to ensure the security of all transactions. Because of these encryptions, many prefer to use bitcoins instead of other forms of payment. As bitcoins become more commonplace, it is important to understand exactly what they are, so we can know how to use them properly and possibly use it as a form of investment.

So, what exactly are bitcoins?

The cryptocurrency was created in 2009 by an anonymous individual who went by “Satoshi Nakamoto.” Bitcoins are not centralized. There is no government or central group that controls the value or distribution of bitcoins. To obtain bitcoins, you do not need to share any of your information. There are no transaction fees.

To get bitcoins, there are two options. First, you could buy them on an exchange website. The value of bitcoins varies greatly from day to day, sometimes experiencing drastic changes in just a couple of hours. At the time of writing this article, one bitcoin is equal to $7,599.99, which is relatively high for this past month.

The other way to get bitcoins is through a process called mining, where a person renders a service to the bitcoin network. In exchange for the valuable service, such as network maintenance and transaction processing, miners may receive transaction fees from customers who want to speed up a certain transaction or from solving complex mathematical problems associated with the transactions. Usually, for each problem solved, a miner may receive up to 25 bitcoins. Most miners have specialized softwares that can process the type of transactions that come with bitcoins.

There is a limited supply to bitcoins. There has been a cap set on the number of bitcoins to be produced, which is estimated to be 21 million. Every year, the number of bitcoins produced is cut in half. But, after the production ends, transaction fees will be implemented to motivate miners to continue working. So, bitcoins are sure to continue to be an important currency in the future.

Currently, bitcoins aren’t a dominant currency in any nation. However, it could be used as an investment opportunity. Bitcoins are much like stocks except that the value of bitcoins depend less on governments and economies, but rather on the common people. Because of this, the value of bitcoins is much more volatile than stocks. However, with careful planning and a watchful eye, investment in bitcoins could be very lucrative.

Bitcoins are certainly becoming more common and they might soon be our main form of currency.  Even though there are still many challenges to deal with like quantum computers, a computer that stores information by using the quantum state of subatomic particles. But one thing is for certain, bitcoins are here to stay.

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