First timers out there, fret not. The web might offer convoluted explanations for this new virtual currency, but we break it down and give you all you need to know about Bitcoin -- without the fancy schmancy tech speak.
What exactly are Bitcoins?
Very simply, Bitcoins are a new form of currency that people use in online transactions. Unlike your typical Paypal or credit card online exchanges, Bitcoin (BTC) is its own currency with its own value and trading ability. A decentralised currency, meaning it isn’t controlled or regulated by a head authority, Bitcoin is not subjected to organisations such as the Federal Reserve in America or the Monetary Authority of Singapore (MAS) locally.
How they are created?
This concept might be the most challenging for first time users to grasp. Bitcoins are mined (yes, that’s a metaphor) by software programmes that solves complex algorithms in order to obtain units of Bitcoin. The difficulty of such algorithms are controlled so that the value of Bitcoin stays consistent with its natural demand and supply. This process ensures that Bitcoins are not carelessly created, protecting the Bitcoin economy from inflationary or deflationary pressures.
When did Bitcoins originate?
Bitcoins were first studied as a possible virtual currency in 2008 by developers who researched this possibility under the pseudonym Satoshi Nakamoto. It was officially introduced in early 2009 and started gaining in popularity just this year.
Can they be forged?
As Bitcoin is not under the regulation of any body of authority, many fear that this may cause it to be an easy victim of forgery and hacking. However, Bitcoin forging is actually deemed almost impossible as the Bitcoin network’s computing power already trumps most of the world’s speediest supercomputers. This makes it very costly for hackers to fake transactions, and the damage that they could possibly do is also extremely limited.
Can it be converted to cash?
Yes! Bitcoin functions just like any currency and hence can be converted to Singapore Dollars (SGD), American Dollars (USD) or any other currency as you please. The current exchange rate is 1BTC=158.8SGD, and interested users can sell their Bitcoins for cash on websites such as SGitcoin and LocalBitcoins.
How do I buy Bitcoins?
Since you can sell your Bitcoins for cash, users can also buy Bitcoins just like how they buy foreign currencies if they wish. Similarly, sites such as SGitcoin and LocalBitcoins facilitate both the buying and selling of this virtual currency.
Can I earn interest?
As it is growing in size and influence, the Bitcoin economy is a deflationary one because its demand is set to increase exponentially while its supply rises at a constant rate. This means that 10 Bitcoins today will be worth more than 10 Bitcoins tomorrow, naturally. The growing value of Bitcoin thus guarantees a sure positive return of the currency.
If you are searching for Bitcoin banks that provide you annual interest, the closest organisation appears to be Flexcoin, the world’s first and only Bitcoin bank.
What’s in it for me?
While its anonymity and facelessness threaten many who fear the spread of illegal transactions, Bitcoin’s advantages far outweigh its limitations. Bitcoin’s perks include fast and convenient transactions, no handling fees and the protection from account freezing, apart from other benefits. A cashless and savvy spending method, Bitcoin is a fast-rising trend that many are keen to hop on to.
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