About Bitcoin & Where To Trade It
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What is Bitcoin?
Bitcoin is widely accepted as being the first cryptocurrency. Although experiments in cryptocurrencies have been ongoing since 1982, Bitcoin is the one that gained the most traction. Bitcoin is a digital currency invented in 2009 that uses decentralised technology to enable the peer-to-peer transfer of value. Invented by a person or persons called Satoshi Nakamoto (nobody knows!), the idea was to produce a currency independent of any central authority. An electronic payment system based on mathematical proof.
Coming just after the financial crash of 2008, bitcoin was of its time. In the wake of a world pulled apart by unscrupulous banks, the climate was right for a payment system that could operate on zero trust. So Bitcoin is a currency, created and held electronically. You can buy or sell bitcoin on several exchanges across the world in exchange for your local currency. You then store your bitcoin on a digital wallet, which you can keep on your laptop or (more frequently) phone. You can the transfer your bitcoin to others (pay them) instantly, and as easily as sending an email. And there are almost no transaction fees.
Why the big fuss?
As it is an open source protocol worked on by developers across the world, bitcoin is not owned or controlled by anyone. It is completely secure (if you store it correctly), and is completely anonymous. Bitcoin has a number of key advantages over conventional currencies:
- they are sent from person to person over the net. There’s no need for banks, clearing houses, delays and large bank fees
- because nobody controls bitcoin, your account can never be frozen and there are no arbitrary limits on what you can send or receive
- because ownership of bitcoin is anonymous, banks and governments have no sight of how many you own or how much you spend
- baked into the protocol is the rule that only 21 million Bitcoins will ever exist, meaning it is a “deflationary” currency
- Bitcoin is public. It operates an open source protocol, so anyone can check the code and make sure it’s doing what it’s supposed to do
- Bitcoin is decentralised. You don’t have to put your trust into any person or organisation to use it (eg a bank, which can go out of business or print more money when they fell the need)
- Bitcoin is not permission-based. Anyone can use bitcoin. To show you what that means, 2 billion of the world’s population do not have a bank account. They haven’t been given permission.
That’s what all the fuss is about, and why the banks, governments and institutions really aren’t keen on it at all.
What can I buy with Bitcoin?
Bitcoin as a payment system is still embryonic, but is gathering pace fast. We’ll soon be adding a section on WCC about the places where you can use your bitcoins.
Growth has caused some teething problems which need to be ironed out for bitcoin to become a recognised and widely established method of payment. The first of these is transaction times. As bitcoin’s popularity grows, so too do the number of simultaneous transactions taking place on the blockchain. This has put a strain on things, slowing down transaction times. The average time for a completed transaction is 10 minutes currently.
The second is one of value. As you’ll have seen, the value of a bitcoin fluctuates wildly. Relatively small volumes of trade can have a significant impact on the price. That’s potentially OK if you’re an investor in bitcoin, but not if you want to use it to buy and sell things. That cup of coffee you bought for 0.0003 BTC yesterday was $1.90, but today it’s gone up to $14!! Bitcoin valuation needs to stabilise before it can be used as everyday currency.
Where can I buy, sell or trade Bitcoin?
We recommend you buy, sell or trade bitcoin at a trusted broker. Our favourite is at the top of this page. You can read our reviews of the top brokers here.