What Is Bitcoin? And What Makes It Tick?

Bitcoin is a decentralized digital currency based on the blockchain technology.

Blockchain is a made up of a "chain" of linked data units called "blocks" that store information about each and every transaction, hence the name. Each block stores a transaction’s:

  • date and time
  • value
  • buyer
  • seller
  • and a unique identifying hash code.

Bitcoin is a cryptocurrency

Bitcoin is a cryptocurrency. A cryptocurrency is a form of digital currency that generally only exists electronically and is secured by cryptography. There are more than a thousand cryptocurrencies in existence, with Bitcoin and Ether are the most well-known popular. Like all cryptocurrencies, bitcoin is virtual and electronic, which means there is no physical coin or physical bill associated with it.

However, it can be converted to cash through services that allows you to cash in cryptocurrency. It can usually be exchanged with someone online, using a phone or computer, without the need for an intermediary service like a bank.

Bitcoin has no centralised regulatory authority

Bitcoin transactions are solely processed on a network of computers connected to the blockchain in such a way that there is no central regulatory authority. Bitcoin regulatory policies, such as the inflation rate, are enforced through a set of algorithmic rules which must be agreed upon by the majority of nodes in
the network.

Because Bitcoin is decentralised, Bitcoin transactions cannot be interfered with by government or financial institutions. With conventional payments systems such as PayPal or credit cards or banks, a lot of user’s private information is stored in a central system that can be hacked, giving hackers access to full financial records.

Bitcoin is secure

The first time I heard about Bitcoin the words "scam" and "insecure" are the first words that ran through my mind. I thought it’s just another pyramid scheme where the owner would end up driving into the sunset with everyone’s money. Then I learnt that Bitcoin is based on the blockchain technology. You can read this post to understand how blockchain technology makes Bitcoin secure.

Bitcoin has safeguards in place to prevent fraud and ensure appreciation in its value, thanks to the blockchain technology that it is based on.

Each and every Bitcoin transaction that has ever been carried out exists on a public ledger accessible to anyone. This makes the transactions difficult to fake.

Bitcoin value flactuates

Bitcoin was launched in 2009, and eversince, its value has risen dramatically. The value of 1 bitcoin, that was under $150, is now $62 000 as of October 2021. The value is expected to continue rising as more people invest in it.

Bitcoin transactions are lightning fast

Bitcoin transactions are very fast because there are no central intermediaries, like banks, involved. All you have to do is key in the receiver’s bitcoin address and transfer.

Bitcoin’s transaction fees are very low

Bitcoin’s transaction fees are very low, way lower than the conventional bank charges. In fact, Bitcoin transactions are virtually free, all you pay is a very small fee for miners (who process the transaction).

Bitcoin transactions are anonymous

Bitcoin transactions are anonymous which is an advantage to people who prefer financial privacy. Unlike the credit card system where your name, billing address, and other private information are needed to process a transaction, with Bitcoin, all you need is the receiver’s address.

Sydney Chako

Mathematics, Chemistry and Physics teacher at Sytech Learning Academy. From Junior Secondary School to Tertiary Level Engineering Mathematics and Engineering Science.

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