Bitcoin has become quite famous, yet many do not know what it actually is and how it can be useful to them. However, you will have to know certain things that will help you in the future to cope with modern society. Bitcoin is the first cryptocurrency that was launched in 2009, by the pseudonymous Satoshi Nakamoto.
Satoshi’s identity is yet to be discovered, as many tried to find him or them out but failed miserably. However, the real question is- how does bitcoin work? And why do they have value? Well, on an ironic note, bitcoin works fine and does have a high value.
Jokes apart, let us find out what bitcoin is and how it works.
The first digital currency
Bitcoin is a cryptocurrency, rather the first in the market, as I mentioned before. Bitcoin is defined as a digital asset by many regulatory bodies and is legal for trade. Like other assets such as gold, stocks, bonds, etc. bitcoin is also one of them and can be bought and sold through digital exchanges.
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Circulating Bitcoins throughout the economy
Bitcoin is circulated by professional engineers trained for coding bitcoins. None of the banks or regulatory bodies can take this in their hands, making it a decentralized asset. This means that you don’t have to go to banks and get yourself bank accounts for using bitcoins. However, you need to have a wallet that supports bitcoins for trading. This makes you the sole owner of your asset and currency that no one but you can access and use.
How Bitcoins Work?
Bitcoin works like any other asset; the market opens with a price depending on certain factors that we will talk about later. Then throughout the day, the price bounces from this value to that. And if you are planning to buy it, you have to do so with the price it shows. Once you purchase bitcoin, you can store it in your wallet that supports bitcoins.
Then you can do whatever you want with bitcoins, for example-
1.Use bitcoin as regular money
The bitcoin in your library can be used as regular money. That means you will be able to spend the money on daily commodities and other purchases that you make online or offline. Many companies throughout the globe accept bitcoins, so you won’t have difficulty there.
2.Use bitcoin as an asset
When you purchase Bitcoin, you will be able to use it as an asset as well. Bitcoin is treated as a digital asset, and some other underlying factors give it value. Hence, the price of bitcoin keeps on swinging from one value to another. So, if you are a trader, you can use bitcoin efficiently for earning profit.
3.Money transfer to foreign countries
The normal methods take a lot of time when you have to send money, plus you have to pay the exchange fees if the money is sent overseas. But if you use bitcoins, you can send the currency to anyone with a bitcoin wallet, even without having to pay for the exchange fees.
Now that you know what bitcoins are and how they work, it’s time to talk about what gives them value.
The Underlying Factors Behind Bitcoin’s Value
We have to agree that bitcoin can be used very effectively, just like I mentioned in the previous section. The other reason for bitcoin having value is its transportability and durability, which makes it even easy to use, plus no bank accounts, remember?
The other underlying factors are-
Only 21 million bitcoins will ever be mined; among those, a little more than 18 million have already been circulated. Before the halving in 2024, the demand will increase, but supply will fall drastically, increasing the price.
Bitcoins are secured with cryptography; hence, they cannot be hacked.
Bitcoin can go as low as 0.00000001.
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