What is Bitcoin and What is it Used For?
The first time the term Bitcoin ever surfaced was in August of 2008. Two developers Satoshi Nakamoto and Marti Malmi registered a new domain with the name bitcoin.org. Later on, in October the same year, Satoshi released the Bitcoin whitepaper.
The first Bitcoin transaction involved the purchase of a pizza. Who would have thought that the coin would grow so exponentially to the point that it would not require much of an introduction?
Bitcoin is the first-ever cryptocurrency to exist. A cryptocurrency is a type of money that operates similarly to fiat currencies; only its operation is fully online. The physical photos you see of Bitcoin are a novelty and would be worthless without the private code printed inside them.
Bitcoin is a decentralized peer-to-peer network; no single person or entity controls it. It can also not be printed, and its amount is very limited in that only 21 million Bitcoins can ever exist.
Just like with traditional currencies, you can use it to buy goods and services. Many retailers and service providers are joining the Bitcoin bandwagon. Major banks and governments are getting behind the coin as well. However, it has been banned in some countries.
Currently, there are two main types of Bitcoin:
- Bitcoin Cash (BCH)
- Bitcoin (BTC)
They are both cheap, fast, and you need a wallet to store and operate them.
New Bitcoins are created through mining, which is a process that entails solving complex sums using very powerful computers.
There are three main ways to acquire Bitcoin:
- Buying Bitcoin in exchange for traditional money
- You can sell things and let people pay you with Bitcoins.
- Mining process
Who Created Bitcoin?
BTC was first introduced as open-source software by an anonymous programmer or a group of programmers under the alias Satoshi Nakamoto in 2009. There have been many speculations about the real creators, but anyone mentioned in the past has publicly denied being Nakamoto.
Around mid-2010, Nakamoto moved on to other things, leaving BTC in the hands of a few prominent BTC community members. He also made Gavid Andresen a lead developer.
Characteristics of Bitcoin
- It is decentralized – BTC is independent of any governing authority.
- It is pseudonymous - Your details are not required for you to process a transaction.
- The transactions are irreversible – BTC is based on Blockchain, which ensures permanent and public transactions.
- It is fast – The BTC network processes transactions almost simultaneously.
- It is transparent – BTC transactions are publically recorded on a Blockchain.
Pros and Cons of Bitcoin
- Financial freedom from governing authorities controlling the transactions
- It can’t be counterfeited.
- You are given the option to choose the transaction fee amount, or you can choose not to pay at all.
- Highly secure transactions
- The transactions are transparent and neutral.
- Being completely digital, it is highly portability that practically any sum of money can be carried on a flash drive or even stored online.
- Legal questions – Bitcoin’s legal status varies drastically from country to country.
- BTC prices are extremely volatile
- Losing your keys essentially means losing your wallet.
- Its level of recognition is low as compared to fiat currencies.
What is Bitcoin Used For?
Technology is advancing day by day, and people are getting familiar with different innovations, bitcoin being one of them. Most people know about bitcoin, as it is the era of cryptocurrency. But what bitcoin is used for is still unknown to many. Bitcoin has some unique features that can attract a lot of people to explore it. Here are a few major points about what bitcoin is used for.
- Using Bitcoin For Private Purchases
To understand what bitcoin is used for, it’s important to understand one of the key aspects of private spending. Bitcoin users identify with encrypted keys that are assigned to them rather than their real names. This gives a big advantage to the users to spend money privately in peer-to-peer transactions directly. This privacy factor holds importance for quite a lot of people. Most of the users want to operate without showing their real identities due to emergencies.
Apart from the benefits, there are a few drawbacks to this privacy. People use excessive privacy for bad purposes, and bitcoin gets used for criminal activities and other unethical ways. It is used by people surfing the Dark Web, mostly to visit Silk Road, one of the biggest marketplaces. Bitcoin is used for making transactions at this place. Although activities that can cause harm are not allowed by the management of Silk Road, many drugs can still be illegally bought through bitcoin.
- Using Bitcoin to Make Cheap and Quick Transactions
The transaction cost of bitcoin is one of the lowest, giving it a major benefit over the traditional currencies and is one of the major applications for what is bitcoin used for. The transaction fee is not costly at all when compared to banks, online paying systems, etc.
The biggest advantage is to people living abroad and wants to send money to their family as a remittance, bitcoin will cost less, unlike bank transfers. The remittance flow between countries and banks is one reason for bitcoin to get on the big screen.
If you try to use conventional ways to do international transfers, it will cost you a lot both in terms of money and time. According to the World Bank reports, the average fee for remission transfers was 7.72% in early 2015. Cost isn’t the only factor that places Bitcoin; first, time is also there. Conventional ways take a lot of time to transfer money because of the multiple verifications between the banking channels.
- Using Bitcoin to Shop Online
As time passes, bitcoin is getting familiar to many people, and many countries have started using it commercially. Bitcoin can be used for normal day to day life transactions too. You can use it to buy goods from retailers, whether online or physical. As the bitcoin gets popular, more retailers will accept bitcoin payments because of its enormous benefits.
This opens new doors for merchants, business people, and other shop-keepers. Bitcoin’s cheap transaction costs give all the stakeholders a major benefit, increasing their business by cutting the extra cost of credit cards, fees, statements, and verifications. Bitcoin has the ability to work with micro-payments, which are not usually catered by other financial systems. This opens new windows for doing business and strategies for trading.
Things You Didn't Know You Could Buy With Bitcoin
Bitcoin is one of the most popular cryptocurrencies in the world right now. It stands out of the crowd with its ease of use, plus a lot of merchants actually adopted it as a payment system. Sure, some removed it because of its volatility, but there are still plenty of things you can buy with Bitcoin at this time.
- Computing, hosting, and software
Microsoft has support for Bitcoin purchases so that you can buy many of their products. On top of that, some hosting services like NameCheap are also supporting cryptocurrency payments, and even VPN services such as VPN Express will allow you to pay with Bitcoin for their services. NewEgg allows you to pay with Bitcoin as well, so you can purchase a variety of computer products with cryptocurrency if you want.
You may not know it, but you can also buy a vehicle with Bitcoin. Companies like Bitcars and Auto Coin Cars allow you to use your cryptocurrency to acquire a vehicle. You will also find lenders that will offer you loans that you can pay back with Bitcoin.
Food and drinks
There are plenty of companies in this industry that will accept bitcoin payments. These include Papa John’s, Spicescave, Burger King, Dominos, and Subway. Even KFC Canada accepts Bitcoin. You will also encounter a few local bars in the Netherlands, Austria, Japan, and many places all over the US, where you can pay your bar bill with cryptocurrency.
Gold and silver
Some online brokers allow you to invest your Bitcoin in gold and silver. iTrustCapital, GoldSilver.com, and Bitpanda Metals are all great brokers that will allow you to buy silver and gold with your own cryptocurrency. Some other important companies include GoldMoney and Vaultoro.
It’s possible to use Bitcoin to pay for your vacation if you use the right service. Alternative Airlines, ScubaOtter, Cheap Air, and Expedia are some of the top travel businesses that support Bitcoin. They usually provide some amazing deals, which makes them extremely convenient and professional.
If you want to spend your Bitcoin while supporting a good cause, you should know various organizations have Bitcoin support. Wikileaks, Wikipedia, ONU, and Greenpeace will all accept any Bitcoin donations.
Gambling and videogames
If you want to get digital licenses for videogames with Bitcoin, you can do that via Keys4coins. Then you also have PSN that also supports Bitcoin, as well as Xbox. In case you like betting, then you can use Sportsbet and pay with cryptocurrency.
Can Bitcoin Scale?
Without a doubt, bitcoin is one of the largest cryptocurrencies in the world. However, the idea of bitcoin scalability has always been a debate in the crypto-world. That’s because bitcoin can scale even further. Currently, bitcoin can only process 4.6-transactions every second. That’s slow when compared to other platforms. For instance, Visa alone averagely processes 1,700-transactions per second.
With that in mind, it’s challenging to increase the adoption of bitcoin since it’s bottlenecked by scalability. Today, most companies are adopting blockchain technology. But there’s also the rising concern when it comes to deploying new technology. And in this case, the unsolved issue of scalability is one of the challenges that face blockchain practical applications and adoption.
How Bad is Bitcoin’s Scalability?
Unfortunately, to increase the block size or even decrease it, reducing the hash complexity isn’t enough. More importantly, the ability to scale always reaches a ceiling before getting to the necessary transactions like the Visa business.
Visa can handle up to 150-million transactions a day. In comparison, bitcoin’s speeds are tremendously lower. Currently, bitcoin can only handle 1MB. What’s more, the current generation of a block in bitcoin is 10-minutes. That said, bitcoin can now only generate 4.6 transactions every second.
Solving Bitcoin's Scalability
Several solutions are already being implemented to solve the scalability issue of bitcoin. These solutions include:
In Bitcoin, batch payments have been featured through the RPC sendmany. That has led to bitcoin forks such as Dogecoin, Digibyte, Bitcoin Cash, among others. Most exchanges are already doing this. You can check it by looking at your transaction ID on the blockchain explorer.
That said, you will notice that your wallet sends out to several different wallets simultaneously. The benefit of this is that you only have to pay one transaction fee. Unfortunately, different transactions from several wallets cannot be batched. That’s because batch transactions are only limited to one-to-multiple and not vice versa.
This hard fork's primary reason was to increase the TPS to 8MB from the bitcoin speed limit of 1MB. Bitcoin Cash is now an alternative to bitcoin with the advantage of faster transactions. This fork increases the block size even though its speed is increased compared to bitcoin. However, Bitcoin cash doesn’t have enough speed to cater to the global market at once.
Through the lightning network, you can take your bitcoins and transact using a private party. That means you can use the lightning network to create a payment channel. With that in mind, the lightning network doesn’t run its transactions on top of the bitcoin blockchain.
The advantage of this is that it delivers instant transactions with zero-fee. Therefore, you can buy bitcoins without having to wait for their arrival in your wallet. But the transaction will only occur off-chain, and the users need a lightning node.
The Future of Bitcoin: Expert Predictions
We've seen bitcoin top even when the economy is at it's lowest. What's more, we've seen all types of trends from bitcoins price. That makes you wonder; what is the future of bitcoin? Or better yet, should I invest in bitcoin? Well, cryptocurrency trading is one of the most lucrative businesses of the century.
Most investors equate bitcoin trading to the California Goldrush of the 1880s. That's because we've witnessed a rise of billionaires worldwide who claim their wealth was generated from cryptocurrency trading. That said, I'm sure we all want a piece of this pie. So, with that in mind, let's look at bitcoin's future and whether or not you should invest in bitcoins.
Future Bitcoin Price Predictions
- Bobby Lee- $333,000
The first China crypto-CEO, Bobby Lee, predicts that it will take close to 20 years for the price of bitcoin to hit the $1-million mark. However, by 2021, he says that bitcoin will hit $333,000 by the end of the year. More importantly, Bobby says that the coin will fall again to $41,000 in 2023.
- Mark Yusko- $500k
Mark is currently the CEO of Morgan Creek Capital Management, but he was a bit skeptical about investing in Bitcoin at first. His short-term prediction of the bitcoin price is currently set at $100,000 by 2030 and $500k within the same year. What's more, Mark also believes that bitcoin will reach the equivalent of gold.
- John Pfeffer-$700k
Pfeffer is currently a partner of the Pfeffer capital. He has enough experience to give the bitcoin price prediction a shot, and according to John, bitcoin will become the dominant store of value. The crypto-investor uses mathematical equations to predict the price of crypto-coins.
- Winklevoss brothers-$500k
Tyler and Cameron Winklevoss are the twin miracle investors of the crypto-world. They quickly became billionaires through crypto-investments. These two crypto-geniuses predict that bitcoin has a 300-400% growth potential.
The Future of Bitcoin: Summary
Bitcoin is set to increase in value over the next few years from the predictions of the top cryptocurrency traders. Each expert has a different opinion on the exact price that bitcoin will rise to, but the only constant idea is that this coin is set to rise. What's more, more and more businesses are adopting bitcoin as a method of payment. That means the mass adoption of bitcoin is ever increasing.
Should You Invest in Bitcoin?
That typically depends on what you are planning to achieve. Bitcoin trading is not a get-rich-quick plan. It takes time and knowledge to make substantial profits from bitcoin trading. What's more, don't let anyone trade for you. The best way to get the most out of your bitcoin trading is by learning the craft for yourself.
That said, we offer free courses for anyone who would like to enter the cryptocurrency trading industry. This course is designed for both beginners and advanced level traders. The best part is that it's free. So, what are you waiting for? Get started with your online cryptocurrency class today.