Although a decade and a half went by since virtual currency was invented and began to be used referring to an alternative, more convenient payment method, the concept, known in its latest form as “bitcoin“, is still surrounded by many controversies, people still arguing, some in favour, others against its use.
What is a bitcoin? How easy and secure is it to use when shopping for goods? How can it be obtained? These are only some of the questions troubling those who are willing to give it a try.
Bitcoin Definition and Short History
The term of “bitcoin” refers to an all-virtual currency that is controlled exclusively by the people who use it, without the interference of a central authority or a third party of any other nature. It can also be regarded as one of the most notable, efficient bookkeeping systems with triple entry in use.
The concept based on which this virtual payment method was created is called “crypto-currency”, and it was promoted for the first time in 1998. However, the bitcoin, as it is today, was created in 2010, when electronic payment for the acquired goods and services became a very popular solution.
The man behind this new currency is the Japanese Satoshi Nakamoto. After starting the initial work group, he left at the end of 2010, only very little being revealed about his personal life in the meantime. A community that is in a continuous expansion is now in charge with developing, implementing and improving the virtual payment method.
Advantages of the Bitcoin
- Lower risk rate – A payment made using this virtual currency is irreversible and very secure, because it does not contain “sensitive information” of the person who uses it. Not only clients, but also merchants are protected, because their loss risk related to fraudulent actions is considerably diminished. Besides, by accepting bitcoins, business owners can expand their activity easier, conquering market segments that are inaccessible in other conditions.
- High level of transparency – The information about the available supply of bitcoin can be verified by any user, any time. This is because the currency cannot be manipulated to serve the interests of only some people, producing losses to the greatest part of those who use it, like it happens in the case of currencies that are controlled by a central authority.
- Small fees – The fees charged for the transactions using bitcoin instead of regular currencies are either non-existent, or insignificant, such as the 1/10 of a percent. Usually, only clients who want their payments processed and confirmed with priority are requested to pay fees.
- Simple – With the help of the so-called “merchant processors”, the amount of bitcoin merchants cash as payment for the services or goods they provide are collected and converted into regular currency. The same system facilitates the transfer of the resulted sums to the merchants’ bank accounts.
- High security level – The fact that the currency is protected by an encryption code offers the users an increased protection against identity thieves that may attempt to empty their accounts. It also keeps the buyers sheltered from possible abusive maneuvers of the merchants, such as changes that are not accompanied by a note.
What Is a Bitcoin Wallet?
Just like in the case of any other currency, the first step to take if you want to become a bitcoin user is to create an account, named “wallet”. Exchanges are specially created for hosting the wallets of new users, so it is best to start from here instead of having the account directly on your computer. The wallet being hosted on an exchange does not mean that you have less control over your bitcoin funds, but it offers you the guidance you need until you become more familiar with this virtual currency.
The “wallet” is in fact software specially designed to help users store their bitcoin supply. It can be installed on any device incorporating a hard-drive, from laptops to desktop computers and mobile phones. The wallet is also designed to be set on the so-called “thumb drives”, that offer an increased protection against hacking attempts.
Storing bitcoins is not the only function a wallet has; it can also send or receive payments. It is, in fact, a tiny part of the huge network exclusively dedicated to this currency and controlled only by the users. The wallet is divided in several sections, the most important ones being the page informing you on the amount of bitcoin in your account, the area presenting your most recent transactions and the section that helps you to send payments.
At registration, you receive a unique code that represents your address as user of the virtual currency. As a beginner, it is recommended that you stick to a single wallet, but, when your confidence in bitcoin increases and the number of transactions you make using it grows, you can create several addresses and wallets.
Several types of systems were designed by the developers of the electronic currency to support the wallets. They have different characteristics, so you can choose the one that suits your needs better.
- Bitcoin Qt – It can send and receive bitcoin payments quick and easy, also incorporating a function that helps you track transactions. The only inconvenient is that it is a little difficult to synchronize.
- Armory - It is the superior version of Bitcoin Qt, all the synchronization problems being completely eliminated. Using it, you have the possibility to store your bitcoin supplies, not only online, but also offline.
- Electum and Multibit – These two wallet support systems have the advantage of not requiring synchronization of the transactions’ history. The first type makes possible the recovery of the data you may lose, by providing you a special passcode, while the second one is ideal for those who are not so familiar with bitcoin operations.
With so many instruments meant to simplify its use, the bitcoin has every chance to gain supremacy on the online market and become the favorite payment method of clients and merchants alike.