After the US housing market crashed in the 2000s, Satoshi Nakamoto devised the clever system behind Bitcoin in 2009. Nakamoto reinforced it by implementing Blockchain. (Several people claim to be Nakomotos, but their real identity is still a mystery.)
But what is Bitcoin? In untechnical and layman’s terms, BTC is a currency that only works online. It does not have a physical form and is not owned by any single entity.
What about Blockchain? Blockchain is a digital ledger that stores all the transactions that occur. When two persons exchange BTC over the internet, the information is stored on blocks. Millions of exchanges happen in a day, forming a chain of blocks. Hence, a Blockchain.
In this article, you will learn the nitty-gritty of Bitcoin, its benefits, and its drawbacks. Buckle up!
Features
The parts of Bitcoin described here get to the heart of the matter in clear, brief language.
Decentralized
Being the first of its kind, BTC introduced a unique structure. Imagine this: USD is American currency, Indian Rupee is Indian, Yen is Chinese, Taka is Bangladeshi, and so forth. But BTC belongs to no one. It has a distributed and accessible system controlled by anyone. With a teeny-tiny mining machine, you can even create it.
Mining
“Mining” is the process by which more bitcoins are created or “mined.” In essence, “miners” use “mining machines” to record transactions. The machines solve complex mathematical problems called hash problems. The one who solves it adds a block to the blockchain, for which they receive a small amount of BTC as a reward.
Bitcoin Wallet
Imagine software like PayPal or any other. They resemble your phone and wallet. You do not have the money in cash, but you own an equal amount. Likewise, bitcoin is also storeable on software like Binance. It becomes your wallet when you store it. You can also buy and sell through the software.
Volatility
Bitcoin is at the mercy of the supply and demand chain. Its value can go as quickly down as it can go up. It started with a value of $1 in 2009, boomed to $64,000 in November 2021, and has a current value of about $19,800.
Advantages of Bitcoin
BTC was the first of its kind and introduced a system never seen before. Its lightning-fast transactions and ease of operation only add to its benefits.
Cryptographic Build and User Security
If anyone can control Bitcoin, are my transactions not in jeopardy? Well, yes, but no. BTC uses cryptography, a scientific discipline concerned with user security above all. And, as the name suggests, it makes your transactions more cryptic, obscure, and secret. Unless you have millions of BTC and an expert hacker wishes to get to you, you are out of harm’s way.
Free from Government Intervention
Because of decentralization, bitcoins are not taxable. Since it is an independent currency, it is free from all government regulations. It has a few “owners” globally but cannot change BTC’s fundamentals; they can only improve it. Although it is measurable in local currencies, it does not have to follow a government’s policies.
Low Transaction Fee
When wiring fiat or ordinary paper money, sometimes the charges can be burdensome. Bitcoin is exempt from such customs. Even if you wired some money to someone on the other side, the transaction fee would be small.
Devaluation
The value of bitcoin depends on demand, a supply cap, and the free market. The total amount of BTC mined will be 21 million. This will happen by the year 2140. Until then, its free market attribute will prevent your BTC from depreciating permanently. Even if BTC devalues, for the time being, I will eventually recover. This also means there isn’t any inflationary risk to your BTC.
Open Source
Another unique feature of BTC is that anyone can contribute to its development. Its open-source technology allows anyone with the correct knowledge to take part.
Disadvantages of Bitcoin
Of course, it may be much better than fiat currency, but it is not perfect. It can be used for some dark purposes. Below, you will find some of the disadvantages of Bitcoin.
No Reversals
Bitcoin does not have any cashback, refunds, or transaction reversals. Sending the wrong amount of Bitcoin to an impaired person can cost you your money’s worth. Because the transactions are irreversible, BTC users are at a considerable disadvantage.
Limit on Where You Can Spend it
Many companies and franchises accept BTC as payment, but it is still widely limited. So, even if you have millions worth of BTC on you, there is not much you can do with it if the local burger shop does not accept it.
Uncertainty of Value
Doubtless, BTC will reach a higher value as time passes and its market cap maxes out. Still, it is at the mercy of market fluctuations. Too many unsold BTC in the market reduces its value, while too many bought increases its value.
Bitcoin and the Black Market
Because it is almost impossible to trace a transaction, BTC is a favorite on the Dark Web. This may be one of the most significant disadvantages of Bitcoin. The Dark Web has some horrifying content, as YouTube will explain in detail. For that reason, BTC is not only disadvantageous but also harmful.
Loss of Wallets
For some reason, your wallet, which holds your BTC, can get lost. Whether a virus enters your computer or the complex drive malfunctions, all your money will flush down the drain. It is irreversible, and you cannot redeem it back.
