What is Bitcoin?
Bitcoin is a digital currency that can only be created, stored and used online. The number of bitcoins in circulation is capped at 21 million. But don’t worry. The smallest possible denomination is 0.00000001 of 1 bitcoin. So there are plenty to go around.
Why use bitcoins?
Bitcoin is the most popular and widely used digital currency for a few reasons. Unlike regular money transfers, Bitcoin transactions never take more than a few hours. No matter how large the sum or a user’s location. Fees are also considerably lower, never being more than just a few of cents. Chargebacks are not possible with Bitcoin, making fraud almost impossible. No bank, government or person controls Bitcoins. Meaning unlike regular forms of currency, transactions remain anonymous and without the threat of being seized.
How do bitcoin transactions work?
Very simply bitcoin transactions work by sending the digital currency from one online wallet to another. The process begins when a private key (a randomly generated number) is exchanged between the payee and payer. The transaction then goes through a number of confirmations from 0-5. The most common number of confirmations is 1, however more are recommended when sending larger amounts of Bitcoins. However, it is worth noting that each confirmation takes about 10 minutes to complete in the Bitcoin network. Once completed, a transaction can be viewed by anyone in the blockchain, but no sensitive information is available.
How to buy bitcoins?
Bitcoins can be purchased at the following places:
- Exchanges: Buying bitcoins at an online exchange is the best option for those less interested in privacy. This is because they often require proof of identity. As well as buying bitcoins through an exchange, you can also store them there.
- Over the counter: This is when two people meet in person to exchange bitcoins. Although this sacrifices the anonymity of a normal bitcoin transaction it is still very popular. There are many websites that connect Bitcoin sellers with buyers.
- Bitcoin ATMs: Look and act like regular ATMs, but instead of receiving cash, you get a receipt with a designated code. Scanning this code then adds bitcoins to your wallet.
Is Bitcoin legal?
Put simply, Bitcoin’s legal position is improving all the time. In the last few months alone, Japan has recognised Bitcoin as a legal currency and Russia has announced plans to recognise it as a financial instrument. This is a big change in stance from Russia, as they originally banned Bitcoin.
These kinds of changes are becoming more and more common as Bitcoin increases in strength and importance as a global currency. How Bitcoin is regulated, what you can do with it and how it is taxed still varies greatly from one country to another. In addition, new laws and regulations are being added and amended on a regular basis. If you would like to understand more about your government’s position on Bitcoin and possible changes in the future, you can contact a legal adviser.
There are a number of bitcoin wallets to choose from. Some are cloud-based, while others are downloaded to your PC, tablet or smartphone. You can even have a physical hardware wallet for storing your bitcoins. All of the wallets provide the same functionality, i.e. transferring bitcoins from one place to another, but each wallet has their own benefits.
Cloud wallets are the easiest & most convenient to use. However, when storing your bitcoin in the cloud you are ultimately handing the responsibility over to the business holding your BTC. Therefore, trust is essential when it comes to storing bitcoin in a cloud wallet.
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