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Currencies: The concept of Bitcoin

Ever since bItcoin was created,the entire concept has been a mystery to most consumers. No one is entirely sure who created bitcoin, and there seem to be some trust issues. With no overseeing or controlling cryptocurrency, there are some risks associated with getting involved in Bitcoin. But there risks are not more or less severe compared to any other form of alternative finance.

Explaining The Point of Bitcoin

There are many different ways to explain what Bitcoin embodies, and why it was created in the first place. Traditional finance has its limitations and drawbacks. Were it not for companies such as TransferGo, sending money around the world at affordable rates would be all but impossible. Bitcoin makes it possible for anyone in the world to send and receive money, as well as gain access to a financial ecosystem.

What makes Bitcoin different from banks or other financial institutions is its focus on financial inclusion. Large portions of the populat are either unbanked or underbanked, with limited or no access to financial services. Bitcoin is an ecosystem that welcomes anyone and everyone, including those with and without bank accounts.

One statement people will hear often is how Bitcoin allows anyone to be their own bank. Cryptocurrency provides the user with full financial control at any given time, through any device they want to use. There are no business hours, branches, or central entities to seize control of your money. Everyone controls their own funds, and they also bear the responsibility for doing so. This latter part worries a lot of people, as there is no one to refund money, complete a chargeback, or bail out users who are subject to lost or stolen funds.

Bitcoin certainly is not for everybody right now. In fact, the concept of cryptocurrency seems to be ahead of its time right now. Then again, in this day and age of financial instability and insecurity, a viable alternative to traditional finance is direly needed. Bitcoin has the potential to fill that niche, although it is not as commonly used as enthusiasts would like.

The Infamous Satoshi Nakamoto

The creator of Bitcoin, who goes by the pseudonym of Satoshi Nakamoto, piques the interest of people from all over the world. To this date, it remains unknown who is the real identity behind this stage name. Is it one individual, or a group of people? Is Satoshi even alive today? None of these questions have a satisfying answer,Some people may see this as a reason to distrust Bitcoin, although that is a bit far-fetched when doing some research on the topic.

Regardless of who is behind the Satoshi Nakamoto name, Bitcoin was created out of frustration with the financial system. Consumers and corporations are never in full control of their money. Everything is controlled and regulated by banks and governments. Bitcoin is a free market 1model where the funds owner controls his, her, or their financial future. It is, in a way, the pure definition of money. Satoshi Nakamoto envisioned Bitcoin as a way to complement the existing monetary system. However some enthusiasts even see as the tool to replace money as we know it. That seems like a utopian dream for now, and there is nothing wrong with being complementary.

Can You Trust What You Do Not Know Or Fully Understand?

That seems to be the primary barrier to overcome for people who have an interest in Bitcoin, but are not entirely convinced just yet. Since bitcoin is not tangible like cash or payment cards, it is difficult to trust. At the same time, a lot of our daily payments and financial transactions already take place in digital form. Bitcoin is not so different in that regard, even though it cuts out all of the middlemen.

To put this into perspective: when we use a payment card at the checkout, we trust the card reader to accept the card. We also accept our bank to acknowledge and authorise the transaction. The merchant trusts our bank to send them the money as soon as possible, and without any hidden fees or charges. While this system seems to work – most of the time – there are multiple layers of trust required in the current financial ecosystem. More layers of trust means a higher chance of something going wrong.

Bitcoin, being a peer-to-peer currency, reduces the amount of trust required to a minimum. Consumers deal with other consumers or retailers directly. There are no banks involved, and transactions are sent from person A to person B in real-time. More importantly, all of these transactions are publicly visible on the blockchain, creating an auditable record of money changing hands. That, by definition, establishes trust. A more technical explanation of how this system works can be found on Wikipedia.

Bitcoin Is Not Your Average Currency

It is safe to say Bitcoin is nothing like your average currency we use today. All currency in circulation is issued and printed by central banks. Bitcoin is generated through a process called “mining” which requires dedicated computer hardware. The one[s) successfully “solving” a network block full of data will be rewarded.

There is no central issuer of Bitcoin, although Satoshi Nakamoto did “cap” the supply at 21 million coins, to be generated by 2140. National currencies being used today have no cap, and central banks can print virtually unlimited amounts whenever they feel the need to. This process is often called “helicopter money”, a procedure that effectively generates money and value out of thin air.

That does not mean one cannot use Bitcoin as regular currency. For now, acceptance and usage of Bitcoin is not as widespread as it could be. The technology is appealing, but it will take time to catch on. Until that happens, TransferGo has users covered by offering good old-fashioned money transfer services. Check out the calculator on the main website to check the rates! Click here!

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JP Buntinx is a 30-year old FinTech and Bitcoin enthusiast living in Belgium. He is guest writer on TransferGo Blog covering issues around fintech.

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