What is Bitcoin?
At Veldt Gold we believe that Bitcoin, due to its decentralized nature and ease of use, is the perfect payment option when buying precious metals. It bears some similarities to gold and silver in the way that it’s produced, and the fact that there is only a limited amount of Bitcoins that can ever exist. It’s not as limitless as traditional paper money, and it cannot be devalued or taken away from you because there is no central authority that controls it.
What is Bitcoin?
Bitcoin is a type of digital currency that was created, and is mostly held electronically. There has been some speculation about the creator of Bitcoin, who goes by the alias Satoshi Nakamoto, but his real identity remains unknown. Unlike traditional currencies, there is no central bank that controls Bitcoin. It is not printed on paper nor does it exist in any tangible form. The best way to explain how it’s produced is to think about it as a network of computers around the world solving mathematical problems via a piece of software. Bitcoin is the original cryptocurrency, and many others, such as Litecoin and Ethereum have followed suit, although none have reached Bitcoin’s exposure and popularity.
How is Bitcoin Unique?
You can buy stuff with Bitcoin. This is the only similarity it has to conventional money. A huge factor that sets it apart from traditional currencies is the fact that it’s decentralized. It is not controlled by a bank or any other singe financial institution. The idea behind Bitcoin was to create a form of payment that was independent of large banks, and that was pretty much instantly transferrable between users electronically.
Can I hold Bitcoin in my Hands?
No. Bitcoin is created digitally by the people, and not printed in near unlimited quantities by a large central bank. This is the biggest advantage of Bitcoin – the fact that the option of mass production doesn’t exist, therefore it cannot be devalued by creating more and more of it. The process of making Bitcoin is called mining, and it bears similarities to how precious metals are initially extracted from the ground. Anyone can start producing Bitcoin with the right software by joining the ‘miner’ community, using their computer power in a distributed network. Bitcoin also uses this network to process Bitcoin transactions.
How is it Similar to Gold and Silver?
Conventional currency has technically been based on gold or silver, and upon handing over some dollars at the bank you should have received some gold in return. This never worked in practice. Bitcoin, although not based on gold or silver, bears similarities to precious metals in the way it reaches the end user. Precious metals are initially mined, and later created into various bullion products that you can buy either in person or online. Bitcoin is based on mathematics but the process of extracting or creating it is also called mining. The process uses a mathematical formula, which is freely available to anyone, to produce Bitcoins.
What are the Advantages of Bitcoin?
No central authority controls it, which means that nobody can modify the monetary policy or decide to take Bitcoins away from you like the CEB did in Cyprus in 2013.
It’s semi-anonymous. You do not have to provide all of your personal information to be able to buy, sell, and store Bitcoin, and Bitcoin addresses are not linked to any of your personal information. With that said, Blockchain, which is a kind of a general ledger for all Bitcoin transactions that have ever taken place, can show anyone how many Bitcoins are stored at a specific address. The thing that Blockchain doesn’t disclose is who the said address belongs to. To maximize opacity of transactions Bitcoin users are advised not to use the same Bitcoin address over and over, and not make large transactions though the same address. Even without these anonymity measures the Blockchain is still much less transparent than any bank.
Transaction fees are tiny compared to banks. Your bank can charge a $25 fee for Wire Transfers. You won’t ever have to pay this much with Bitcoin. There is also a huge advantage for merchants, who usually get charged around 3% for processing credit card transactions. The average Bitcoin transaction costs much less.
The payments are fast. As soon as a payment from one Bitcoin address to another is processed by the network, it will arrive minutes later.
No chargebacks or refunds, unless the recipient sends you your Bitcoin back. Once the Bitcoin is sent there is no way of getting it back without asking the recipient to send it back to you. This eliminates the possibility of shady buyers defrauding honest merchants by claiming that the product they received is not up to their expectations, and subsequently filing a chargeback through their credit card company.
What are the Disadvantages of Bitcoin?
While Bitcoin is a great idea, and an excellent payment method, it isn’t perfect and it still has its disadvantages.
No chargebacks or refunds, unless the recipient sends you your Bitcoin back. This is an advantage for merchants, and a disadvantage for consumers. This problem is solved by using either a third-party Bitcoin escrow service, or by only dealing with trusted and reputable sellers.
Bitcoin price fluctuates. With that said, the price of everyday necessities such as gas, and groceries also fluctuates, but Bitcoin is more volatile than the prices of your day to day purchases. However, such volatility can be a good thing because returns can be very large in a relatively short amount of time. It can also go the other way. This means that the results of long-term investment in Bitcoin are unpredictable.
Wallets get lost, and passwords get forgotten. If you lose your paper wallet, the Bitcoin still exists in the system, but nobody now has access to it. You cannot get it back. Software wallets can get corrupted, and online wallets can get hacked if they’re not well protected. Your Bitcoin can be lost in seconds. However with proper security in place the risk of this happening is minimal.
Bitcoin isn’t widely accepted. People are usually wary of something that they don’t know much about, and a lot of people are not willing to accept Bitcoin because it has been associated with some illegal activities. What most Bitcoin skeptics seem to overlook is the fact that traditional currencies have been associated with illegal activities on a much larger scale than Bitcoin ever has for much much longer! Hundreds of millions of US Dollars, Euro, and other currencies are moved around daily all over the world in exchange for illegal trades. Compared to the scale of those trades Bitcoin is totally innocent.
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