We live in a world in which new technologies appear every day: social networks that eliminate the content that we upload at 24 hours, autonomous cars that drive themselves, applications to pay in physical stores with our phone ...
But none of them has caused such a great revolution in recent years as the Bitcoins, the new virtual currency that is not controlled by any or government.
Its price has skyrocketed to $ 4,000 in recent days, turning some people who had collected an amount of these coins years ago into millionaires today.
So is Bitcoin the currency of the future? But what is this system, how does it work , and what are Bitcoins really for?
Should you start buying some of these currencies as a form of investment?
In this guide I will answer all the questions you have (and some more that you may not have thought) with such a simple explanation that even a 5-year-old could understand it .
¿ What are Bitcoins?
Bitcoin is a virtual currency that was created in 2009.
The main difference it has with the coins and bills we handle every day is that Bitcoins cannot be touched because nobody prints or manufactures them.
However, they can be used to buy and pay online. You could say that Bitcoins are like money to use the Internet.
It is a form of international money: the price of Bitcoin is the same in all countries of the world, there is no price difference as for example happens with the dollar and the peso or the euro.
Bitcoins are legal in most countries of the world except in Bolivia, Bangladesh, and Nigeria.
In some countries like Russia or China there is a legal limbo : they do not declare this currency illegal, but they warn users to be careful when operating with it.
What makes Bitcoin different from other currencies?
Bitcoins can be used to buy things electronically both online and in some physical stores; In that, it is like other conventional currencies such as the dollar, pesos, and the euro.
But the most important feature it has and that makes it so different from other currencies is that it is decentralized.
What does that mean? That no bank, government or private or public institution controls the Bitcoins.
Who controls this currency then? The users themselves who use it through the transactions they make. Thanks to this, Bitcoins are also tax free.
How is Bitcoin priced ?
Although Bitcoin is a virtual currency that is not controlled by banks or governments, its price also goes up and down as happens with the real money we handle daily.
Today, for example, one dollar is equivalent to 20 Mexican pesos, 0.90 euros, and 19K Bolivians; But tomorrow, these prices can go up or down and one dollar can be equivalent to 19 Mexican pesos, 1.20 euros and 32K Bolivians.
The price of these currencies depends on the value of gold and silver : if one day gold is worth more, your pesos, dollars or euros will also be worth more, and vice versa.
Instead, the price of Bitcoin is determined by the supply and demand of this currency.
If there are more people who want to buy Bitcoins, their price will increase. And if there are fewer people who want to buy Bitcoins, their price will go down.
The Bitcoins market is still relatively small (although it has grown a lot in recent years), and that is why it is not necessary large amounts of money for this currency to rise much one day, and the next too much to fall.
Therefore, the price of Bitcoin is still very unstable : today a Bitcoin can amount to $ 12,000, and within four days it can be worth $10,650.
What are the characteristics of Bitcoin?
Bitcoin has many important characteristics that differentiate it from other currencies that are controlled by public or private institutions such as:
1. It is a decentralized currency
As I told you before, the Bitcoins network is not controlled by any bank , government, or private institutions.
The good thing about this is that no central authority can “rig” its monetary policy and cause a collapse in the system, or simply decide to take money away from people like the European Central Bank did with Cyprus in 2013 .
2. It is easy to open an account
To open an account in a traditional bank you have to present several papers and do different procedures to approve your request.
However, with the Bitcoins you can open an account in seconds, without questions, and without paying any commissions.
3. It is completely transparent
The Bitcoin system stores all the details of each transaction that is made in your network. If you have an address in the system, anyone can see how many Bitcoins you have in your account.
Only they will not know that they are yours because your name cannot be seen, since each user remains anonymous to everyone else.
These measures make this network more transparent than other monetary systems such as banks.
4. Commissions for each transaction are minimal
Your bank may charge you $ 4 for transferring another bank account, or $ 10 commission for a transfer to another country.
In Bitcoin there are no commissions.
Users can include a fee in their transactions to take priority in the processing of transfers, thus making payments and collections made faster.
5. It is fast
You can send money anywhere in the world and it will arrive after just a few minutes as soon as the Bitcoin network processes your payment.
Who controls the Bitcoins system?
All banks have owners, but the Bitcoin network does not. This system is controlled by all its users around the world who make transactions with this currency.
The price of Bitcoin can go up or down just like the real currencies with which we make our purchases or earn money.
But in this system those who are responsible for determining the price are their own users. If there is a high demand for Bitcoins, the price will go up, and if there isn't, the price will go down.
How does Bitcoin work ?
The Bitcoins network consists of two groups of users: those who create the Bitcoins so that others can make transactions with them, and those who only use them to buy online, or sell and buy Bitcoins.
The people who are part of the first group are few, since a powerful computer is needed to solve the mathematical algorithms of the system to record and verify all the transactions that others make.
Most users only buy and sell Bitcoins , and pay online through this virtual currency.
To trade with Bitcoin you just have to download some of the free applications that exist, and create an account. The system will generate a unique address (or password) for you.
With it you can start making transactions once you have bought Bitcoins or made a payment in this currency.
How can I get Bitcoins?
There are three different ways in which you can get Bitcoins . The first one (and the easiest) is exchanging real money (euros, dollars, pesos) for Bitcoins.
You can see where to exchange your local currency for Bitcoins on the LocalBitcoins.com page .
The second way is with the purchase / sale: if for example you put an object for sale on the Internet or offline, you can ask to be paid with Bitcoins to get this currency.
The third way - and the one that less people use - is through Bitcoins mining : by having your computer solve complex mathematical operations to help maintain this virtual network.
There are also platforms such as eToro where you can invest in Bitcoins and withdraw money in your local currency and then exchange it for this virtual currency.
How can I withdraw my money from Bitcoin in cash?
In order to have the money equivalent to your Bitcoins in cash, what you should do is sell them.
This is achieved by registering on websites that are Bitcoins markets where you can sell and buy your coins to other users.
One of the most popular and safe sites is Bit2Me , where transactions can be made from any country in the world, and they will send the money in cash to your bank account.
Another way is to sell your Bitcoins to a particular person; Although this is a method that I do not recommend because they can deceive you and not pay you for your coins.
Once you have made the real money deposit in your bank account, you will only have to go and cash out the amount you want from your cashier.
What are the advantages of Bitcoin?
1. Freedom to send and receive payments
With Bitcoin you can send and receive money from anywhere in the world and at any time only with your phone or your computer.
There are no schedules, no borders, no commissions or taxes (there are only small fees if you want your coins to arrive earlier). Using Bitcoin you have total control of your money.
2. Less risk in payments
Transactions with Bitcoins are safe , irreversible, and personal or private data of users is never sent .
This will protect you especially if you have an online sales business, since buyers will not be able to scam you for example by saying that they have not received their orders or making fraudulent returns.
3. There is more security and control
Bitcoin users are those who have full control over their operations ; Therefore, it is impossible for potential scammers to force unwanted charges such as if it can happen with a normal bank account.
Payments on this network can be made without them being associated with personal information. This provides a high level of protection against identity theft , for example.
4. It is a neutral and transparent system
All the information of the Bitcoin network can be seen by any of its users as it is available in the blockchain.
No person or any public or private institution can manipulate the Bitcoin protocol because it is encrypted to be completely secure.
And its disadvantages ?
1. It is a little known system
There are still many people who do not know the Bitcoins , or if they have heard about this network, they have never used it.
It is true that there are even physical businesses that allow you to pay in your stores with Bitcoins , but the total users are still a relatively small group.
2. The price is somewhat unstable
Being a currency that is not yet known or used by many people, any relatively small event that happens affects the price of Bitcoin.
In theory, this instability will decrease when the Bitcoins technology matures, and there are more users using this system.
What commissions are paid to use Bitcoins?
Most transactions with Bitcoins can be done without any commissions (unlike banks, which will always charge you a percentage for any movement you make in your account).
However, users are encouraged to pay a small voluntary commission so that transaction confirmations are made more quickly.
These percentages are very small, and only a few cents are charged for each operation that is done.
The commissions are used as protection against users who try to send a large number of transactions to overload the network, and also to avoid fraudulent operations such as money laundering.
Bitcoins have been a revolution throughout the world because of the special characteristics they have (especially because they are not controlled by any type of bank or government).
But what is more interesting about this virtual currency is that it has become the easiest method to pay and make purchases in countries with economic difficulties such as Venezuela.
What do you think of this new form of money? Have you tried the Bitcoins yet? Leave me a comment below and tell me what you think and thanks for read