What is Bitcoin and Why is it so Popular?

By Sarah Purtill

To put it simply, Bitcoin is a currency that was created in 2009 by an unknown creator. The creator used the alias Satoshi Nakamoto. Bitcoin is unlike other currencies in many ways. For instance, Bitcoin does not use banks. Bitcoin can be used to buy merchandise and/or services and it can be used anonymously. Because Bitcoin is not tied to any country or susceptible to regulations, international transactions are much simpler. Bitcoin also has no credit card fee.

There are individuals who buy Bitcoin with the hopes that the value will continue to increase. Others use Bitcoin in everyday transactions. Bitcoins can be bought or sold with different currencies on marketplaces called “bitcoin exchanges.” Some of the leading bitcoin exchanges are Coinbase, Bitstamp and Bitfinex. These marketplaces are not perfectly secure, however. In 2016, tens of millions of dollars worth of Bitcoin were stolen from Bitfinex after it was subject to a hack.

Another way to acquire Bitcoin is to mine it. Unlike gold or coal, Bitcoin is not mined from inside a mine or a river bed. Instead, Bitcoin is mined by using computers to solve complex math puzzles. Additionally, this is how Bitcoin is created. At the present, a successful miner is awarded 12.5 Bitcoins approximately every ten minutes. Bitcoin also is not found inside anyone’s wallet. Bitcoin is stored in what is called a “digital wallet.” This digital wallet exists either in the cloud or on a user’s computer. Bitcoin wallets are not secured by the FDIC.

Bitcoin transactions are recorded in a public log, but the names of buyers and sellers are never revealed. In place of that is their digital wallet IDs. This allows people to buy and sell what they want privately, and cannot be easily traced back to them. As a result, it has become the currency of choice for people buying such things like drugs or other illegal activities.

Some of the concerns nations have with Bitcoin is the lack of regulations Bitcoin is subject to as well as the lack of government control over Bitcoin. Another point of concern for governments is taxation of Bitcoin. Bitcoin has become something of criminal’s dream. Because buyer and seller identities are never revealed, people are more brazen in buying and selling things that are considered illegal or immoral.

Although there is an appeal to buying and selling anonymously, these situations must be addressed if Bitcoin is to become and remain a popular currency. There is also appeal in circumventing international borders with digital currency but even that creates problems between nations that have embargos and such. In theory, Bitcoin may be a good idea, but in practice, it appears to create a multitude of issues.

References

https://www.huffingtonpost.com/entry/the-bitcoin-hoax_us_5a3fd6dce4b025f99e17bb2f

https://www.cnet.com/how-to/buying-and-selling-bitcoin-explained/

http://money.cnn.com/infographic/technology/what-is-bitcoin/