Bitcoins are one of the cryptocurrencies on the internet, first found by Satoshi Nakamoto in 2009. The creator of this decentralized currency is still unknown, and there is no much information if Satoshi Nakamoto is a person or a group of people. But there are some questions we can answer, such as What is a bitcoin? What do you mean by decentralized currency?
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Bitcoin Definition
Bitcoin is a type of cryptocurrency that can be used to buy or sell products or services without any bank interference.
That said, bitcoins are decentralised.
Decentralized signify there is no involvement of a bank or any government organization in the trade of bitcoins or the working of bitcoins.
Earlier, there was no tax imposed on bitcoins or trading done by bitcoins. Now many countries have imposed a tax on it; these include India. In India, you need to pay tax on cryptocurrency wallets.
Bitcoins can be used in marketplaces that accept bitcoin exchanges that allow people to buy and sell bitcoins.
But how do you buy and sell Bitcoins?
One can buy and sell bitcoins from marketplaces using different currencies. Many cryptocurrency wallets allow you to buy bitcoins by exchanging other cryptocurrencies such as Ethereum and Litecoins.
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To buy a Bitcoin, Here is what you need to do –
- Download cryptocurrency wallet on your Android or IOS device.
- Create your account with proper legal details (For first-time users).
- Now, select the number of bitcoins or bitcoins valued against the money you can buy the bitcoins for.
- Select a payment method such as PayPal or Credit cards depending upon the payment methods the wallet accepts.
- Complete the transaction, and the bitcoins are now transferred to your wallet.
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You can use these Bitcoins to make transactions when the vendor or service provider has Bitcoin as a payment option. Additionally, you can rest them in your wallet as Bitcoin does not have a fixed value; there are days when prices are higher than the Bitcoin purchase value.
Many people save Bitcoins in their wallets as a form of assets, which they can exchange for stocks or money when the prices are high.
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Trading Bitcoins
When you buy a product or take a service, you need to pay a certain value against that product or money. Ever since the money came into existence, the barter system lost its value, but with Bitcoins’ introduction, hard money is losing its value.
Instead of paying hard money, you can transfer bitcoins to their wallets as a form of soft money or liquid money.
But How to Trade Bitcoins?
- Let us suppose you buy a car from a showroom.
- As a payment form, you ask them if they accept bitcoins instead of a cheque or hard cash.
- If they accept payments in Bitcoins, you ask them for their Bitcoin address or a QR code associated with it.
- Now, you scan that QR code or enter the Bitcoin address and transfer a few bitcoins that value against the car. This means you transfer bitcoins that value the same to the money that the car costs.
- Once the transfer is complete, bitcoins are transferred from your wallet to the vendor’s wallet address. Now, he can choose to cash those bitcoins or store them as an asset for the future.
- Similarly, when someone approaches you to buy your product, you can ask them if they can send bitcoins against hard cash. And the cycle continues.
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Privacy in Bitcoins
Bitcoins are a quiet type of transaction that does not reveal your identity; only the transaction ID is revealed when you make a bitcoin transaction. No personal information, including your name, is revealed.
Why this Secrecy in Bitcoins?
There is forceful secrecy in Bitcoins; your Name and personal information are not revealed; this is because of the working mechanism of Bitcoin.
When you make a bitcoin transaction, it passes through several bitcoin validators assist who validate these transactions. The people who validate the transaction receive a certain amount of commission.
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There are no dedicated authorities who validate Bitcoin transactions; anyone with a bitcoin mining setup can perform these validations.
Future of Bitcoins
Decentralized currency takes back power from the government to regulate the flow of money in any country. No one actually knows the future of cryptocurrencies such as Bitcoins in the near and far future. Many countries such as India(Banned by Banks), China, Japan, and other 68 countries accept Bitcoin payments. On the other hand, countries like Nepal and Ecuador have banned the use of cryptocurrencies.
In India, you need to pay tax on making transactions on cryptocurrency wallets such as CoinBase. So, you pay a certain amount of tax every year despite the bitcoins in your wallet, and you haven’t spent it. Moreover, there are chances you may or may not see cryptocurrency in your country based on the government’s decision.
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Frequently Asked Questions
Bitcoins and other cryptocurrencies have taken a good hold in the current market despite being newcomers. Due to their increasing demand and value, they are one of the good long term investments. But if countries impose a ban on it, you may not be benefited and may lose your money.
There are only 21 million Bitcoins in the world. Investopedia Sources say the value of bitcoins will be halved every 4 years until the last bitcoin is mined, which is unlikely till the year 2140.
You don’t need to buy a complete bitcoin as it values too much, and not everyone can afford it. Instead, you can buy smaller divisions of bitcoins called satoshi’s and wait till their value reaches heights.
Article References
Satoshi Nakamoto
https://en.wikipedia.org/wiki/Satoshi_Nakamoto
Countries legally trading Bitcoins
https://blog.sagipl.com/legality-of-cryptocurrency-by-country/#Following_Countries_Have_Declared_Cryptocurrencies_as_illegal
