Bitcoin has recently become a hot topic, often discussed by traditional media. However there is still a thick fog surrounding it.
As this new technology is based on a decentralized network, encryption protocols and financial transactions, it can be intimidating for the average Joe to even familiarise himself with it, forget about using it!
What is Bitcoin?
Bitcoin is a decentralized digital currency, introduced in the late 2008, based on a peer-to-peer network and a public key encryption protocol.
Bitcoin network
Every transaction is confirmed by a network of computers (hundreds of thousands) across the globe, every 10 minutes, which keep the currency alive and protect against any fraud or double spending.
Bitcoins addresses
Bitcoins are associated with hexadecimal addresses, which can be freely generated and behave as a storing place. As much as an IP address will take you to a website, a bitcoin address will take you, along with its public and private key, to your own stored digital money.
So if I have to send someone a payment, I will need their public key address and my private key, to access my money.
Pros
- Small transaction fees – think how much it costs you sending money with Paypal or international bank transfers
- Fast transactions that are accessible everywhere, as long as you have internet connection
- Encrypted and anonymous transactions
- Great opportunity for citizens of emerging countries
Cons
- Volatile and unregulated market
- Criminal and illegal activities – money laundering and anonymous payment, doesn’t get any better than that
- Being a digital good, it is subject to theft and hacking if precautions are not taken
A revolutionary paradigm
I am confident we are at the beginning of a new era, and Bitcoin should be seen as a new technology, as a concept, comparable to what surfing the web with Netscape was in the early 90s. It was not a user-friendly experience, it was accessible only to the techie population and it definitely did not offer much content. We all know what happened afterward, today we can’t even imagine living without internet access , can we?
It is just a matter of time before the same will happen in the financial world… the clock is ticking!
