Bitcoins – an interesting and complicated new-age online currency that is breaking barriers around the world. Some have termed it as a pyramid scheme; others have termed it as a bubble about to burst. One way or the other, you have probably heard about it. It is very popular and just a week ago, it surged in price reaching $11,000 with total users of over 19M.
What on this planet earth is Bitcoin?
Bitcoin is a type of cryptocurrency which you can use to pay for goods and services – more like Kshs or dollar but set online and anonymously. Unlike the traditional currency, two things stand out as the main difference between bitcoin and traditional currency:
- Digital: Bitcoins are entirely online and unlike traditional currency where you can hold the money and give it to a cashier in a supermarket, bitcoin is totally digital. Every transaction that that is carried out is recorded in online public ledgers called blockchains.
- Decentralized: Bitcoin is not controlled or managed by any government, central bank or institution. Traditional currencies are controlled by central banks including their supply; this is not the case with bitcoins. The central bank of Kenya will supply money based on market needs but bitcoins are not regulated by anyone.
Okay, so who Created Bitcoin?
Word on the street was that bitcoin was developed in 2009 by someone with the alias “Satoshi Nakamoto.” This same person published a paper in October 2008 describing the bitcoin digital currency – peer to peer electronic cash transfer without going through a financial institution. And on January 2009, he released Version 0.1 of Bitcoin software on Sourceforge. Bitcoin burst in the financial scene in 2013 following its value surge.
So how do I get Bitcoins?
There are two ways of getting bitcoins;
- Buying Bitcoins: Yes, you can actually buy bitcoins using your debit/credit cards or wire transfer through specific online platforms. These platforms act as your secure storage for every bitcoin that you buy. Although some platforms do not allow you to purchase bitcoins using debit/credit cards, others like coinbase, Blockchain.info and Luno.com provide such. These online platforms are called wallets and bitcoin exchanges.
Wallets are digital storage platforms bitcoins that act as a virtual bank account. They allow you to send and receive bitcoins and even buy products and services online. They can either be in the cloud (bitcoin exchanges platforms) or on your computer drive.
Point to note: Both of these options have their own drawbacks. On the cloud, they can be hacked and on your computer drive, they can be accidentally deleted or viruses could destroy them. It is advised not to use an exchange as your wallet. Have a personal wallet different to at least guarantee safety and control of your funds.
2. Mining Bitcoins: If you are the patient one and more tech-savvy, this could be an option for you. This is simply how bitcoins are created. It involves using special software to solve complex maths problems and reward is a number of bitcoins. And this is usually done by “miners” who have powerful computers. Most of the time, this is done by a “pool” who usually share the computing power.
The buying, selling, transferring, well, where and how do these transactions take place?
All bitcoin transactions are recorded in a worldwide public ledger called blockchain. Unlike traditional payments systems which have to go through processes that could take days, bitcoin transactions are very fast. Although they are public ledgers, the identities of participants are hidden.
Multiple bitcoin transactions are combined into the bitcoin network creating a puzzle or a block. To create a chain, miners have to put these blocks together by using special software to solve the complex puzzle of putting these blocks together in a process called mining. For every successful solution, the miners have rewarded 12.5 bitcoins. That is how the bitcoins are generated. It is a very complex process that is done in collaboration with different miners around the world.
What is the value of bitcoin and who really decides?
At the time of writing this article, the price of bitcoin is $14,062.80. The value is dependent on its demand which determined at the bitcoin exchanges. The higher the demand, the higher the value. Different exchanges will have different prices at the same time. It is upon you to decide where to buy and sell.
Is it safe to use bitcoin?
Just like physical money, bitcoins are also susceptible to theft – in this case, hackers. Always carry out your due diligence on the type of wallet you opt for. To make your own independent decision on the kind of wallet you would like to have, visit Buy Bitcoin Worldwide and hongkiat.com for reviews. Always note that bitcoin’s worth is based people’s perception of its value.
Finally, where and what I can use to buy with bitcoins?
Because it is a digital currency, there are various online platforms where you can actually buy products and services. Microsoft and Dell are currently accepting bitcoin as a payment option for some of their products. According to bitpay, there were over 100,000 merchants around the world accepting bitcoin as a payment option – most of them in Europe, Americas and Asia Pacific.
In Africa, BitPesa, a bitcoin B2B money transfer platform for African businesses and headquartered in Nairobi allows businesses to send payments to and from Kenya, Nigeria, Uganda, and Tanzania at a low cost through leveraging bitcoin and the blockchain.
So, where do I go from here?
Well, if you are interested in opening a wallet and participating in the bitcoin exchange, access BitcoinAfrica.io for a full guide to the African bitcoin ecosystem.