Bitcoin is a type of digital currency (called cryptocurrency) founded by Satoshi Nakamoto in the aftermath of the financial crunch in 2009.
The main distinction between Bitcoin and regular money is that Bitcoin is decentralized, i.e., there is no central authority that issues Bitcoins, or regulates them. This is the main advantage of Bitcoin as it puts people in charge of their own money and democratizes the process of exchange of money digitally.
Bitcoin, unlike fiat money, is held only electronically and is never printed. The bitcoins are created by the people themselves through a process called Bitcoin mining using computing powers in a distributed ledger network. The technology that Bitcoin is based on is called Blockchain. In other words, Bitcoin derives its value from mathematics, not from governments.
Blockchain is the technology on which Bitcoin is based. It is not a cryptocurrency in itself like Bitcoin, but instead only a technology on which Bitcoin is based.
It can be used for the transfer of any asset where an exchange of money and ownership is required. Under Blockchain technology, any individual can write an information into the records. There is no central authority that has control over this information. The information is appended or updated by the community rather than any individual authority.
It is a lot more basic than Bitcoin, and many major companies have been flirting with Blockchain technology, such as Microsoft, IBM, and ICICI bank.
What are cryptocurrencies?
Bitcoin is just one type of cryptocurrency, and there are others that work on the same model. There are about 1100 cryptocurrencies overall. They are often called ‘altcoins’. Among the most famous altcoins are Ethereum, LiteCoin, Dogecoin, Ripple, and Dash.
Which is the best cryptocurrency?
There is no consensus on which cryptocurrency is the best, however, Bitcoin is the oldest and the most popular with the largest market share. Ethereum is also rising, and in July 2017, almost matched Bitcoin’s market share at 30% against Bitcoin’s 40%. Other altcoins such as Litecoin and Dogecoin are also gaining momentum, and Bitcoin’s domination over the cryptocurrency market is being challenged vehemently.
I can also pay online via NEFT transfers and mobile wallets like Paytm, then what is special about Cryptocurrencies?
It is true that even Indian Rupees, and US Dollars, and all other nations’ currencies are also available as digital currencies, but Cryptocurrencies have many advantages over such digital currencies:
There is no central authority controlling your money.
International transactions can be done easily.
Bitcoin is transferred directly to another person within a few seconds.
Transaction fees are minuscule in comparison to other currencies.
No one can “freeze” your account.
A Cryptocurrency wallet can be set up in a few minutes online, no questions asked. It is hassle-free.
The transactions are anonymous.