What is Bitcoin
A Peer to Peer Electronic Cash System. Think of it as a private transaction between 2 people without any Intermediary. So, there is no middleman. It’s using a powerful technology called Blockchain to avoid any misuse of it. it’s impossible to counterfeit a bitcoin or spend same funds more than once!
Is it anonymous
Contrary to the wide spread belief, Bitcoin is not anonymous; it is private and has an open, immutable ledger. It allows privacy as only the address is public, but this means that activity on the address is examinable to discourage illegal activity.
The blockchain technology ensure the transaction is properly recorded and can never be erased. Furthermore, the ledger of all the activities is stored in every nod of the chain! The ledger is open for anyone to see.
Will Bitcoin be impacted by inflation
The short answer is no. The people who came up with the system limited the ‘Supply’ to 21 millions bitcoins in circulation. There is no central bank printing money from tin air, here, and thus causing inflation and loss of value.
How do I use Bitcoin to transact
Transactions occur with no middlemen, so anyone with access to the Internet can transfer coins to someone anywhere in the world. To receive or send Bitcoins, users must first have a Bitcoin wallet (which I will cover in my next article).
To describe how a transaction works, consider the following scenario.
Tom would provide Sean with his Bitcoin address, similar in concept to an account number. Sean creates a transaction with his wallet to Tom’s address then signs the transaction with a digital signature. Once Sean hits send, his transaction is broadcasted to the nodes maintaining the network.
Why use Bitcoin?
Your transaction will be safe and secured;
No middleman, so no fees;
Instantaneous and it’s all online. You still have to put measures in place to protect your wallet and not lose the key. If it happens, your bitcoins are simply lost!
It’s really hard to predict the future for virtual currencies. Governments can choose to crack down on Bitcoin and similar virtual currencies and limit their use. This will for sure have an enormous effect on their trading value. On the other hand, the more they get accepted, the more they will get popular because of the several benefits they carry for users. I like especially the fact it’s capped; there can be only 21 Million of them. This really safeguards against loss of value because of additional supply.
Keep in mind, that government printed money is backed only by the faith in the government itself! The days where the US dollar was backed by Gold are long gone.