Aon Musk has told users of an online social media app that he believes that virtual currency, bitcoin ‘is a good thing. What is bitcoin and how does it work?
The value of bitcoin increased significantly due to his comments.
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So much so that a unique bitcoin went from being valued at £ 3,400 in March last year to now exceeding £ 24,000.
As currency negotiations have gone global, the Bank of Singapore has suggested that the 12-year-old currency may replace gold as its value store.
However, in October, Bank of England director Andrew Bailey warned of the uncertainty of bitcoin, saying it ‘greatly upset’ him.
With all this you are probably wondering: what is bitcoin and how does it all work?
Everything you need to know here.
What is bitcoin?
Bitcoin, often described as cryptocurrency, virtual currency or digital currency, is a type of money that is completely virtual.
It is like an online cash version. You can use it to buy products and services, but many stores do not accept bitcoin yet and some countries have banned it altogether.
However some companies are beginning to accept their growing influence.
For example, in October last year, PayPal, an online payment service, announced that it would allow its customers to buy and sell bitcoins.
The physical bitcoins you see in the photos are a newness. They would be useless without the private code printed inside.
How does bitcoin work?
Each bitcoin is basically a computer file that is stored in a ‘digital wallet’ application on a smartphone or computer.
People can send bitcoins (or part of one) to their digital wallet and you can send bitcoins to others.
Each transaction is entered into a public list called blockchain.
This allows you to track bitcoin’s history to prevent people from snacking coins they don’t own, make copies or undo transactions.
How do people get bitcoins?
There are three main ways that people get bitcoins.
- You can buy bitcoins with “real” money.
- You can sell things and let people pay with bitcoins.
- Or they can be created using a computer.
How do I create new bitcoins?
For bitcoin systems to work, people can do computer process transactions for everyone.
Computers are used to calculate incredibly difficult sums. Sometimes they are rewarded with bitcoins for keeping the owner.
People just install powerful computers to try to get bitcoins. It is called mining.
But it is becoming increasingly difficult to stop many bitcoins from generating money quickly.
If you have just started mining, it may be years before acquiring a bitcoin.
You can spend more money on electricity for your computer, because bitcoin would be worth it.
Why are bitcoins valuable?
Apart from money, there are many other things that we consider valuable like gold and diamonds. Aztec used cocoa beans as money!
Bitcoins are valuable because people are willing to exchange them for real goods and services, and even for cash.
Why do people want bitcoin?
Some people like the fact that the government or banks do not control bitcoin.
People can also spend their bitcoins quite anonymously. While all transactions are recorded, no one will know your “account number” until you tell them.
In an online chat with social media users in January 2021, the world’s richest man Aon Musk said that he is a big supporter of bitcoin.
He even went so far as to change his Twitter biography as “#bitcoin.”
They have shown support for online currencies in recent years and have caused significant movements in their values due to their own wealth and personal influence.
Due to this special support, the value of bitcoin increased significantly.
is it safe?
Every transaction is recorded publicly, so it is very difficult to copy bitcoins, fake them or spend them to people you do not own.
It is possible to lose your bitcoin wallet or remove your bitcoins and lose them forever. There have also been burglaries on websites that allow you to store your bitcoins remotely.
The value of bitcoin has risen and fallen over the years since its creation in 2009 and some people do not believe that it is safe to convert their “real” money into bitcoin.
This concern was expressed by Andrew Bailey, director of the Bank of England in October 2020.
He said he was “very nervous” about people using bitcoin for payment and added that investors should realize that its price is highly volatile.
By this, he meant that the value could drop significantly at any time and investors could lose a lot of money. [ ref url ]