A Bitcoin is a digital asset designed by its inventor, Satoshi Nakamoto, to work as currency. Economist simply define money as a store of value that can be exchanged. In order for Bitcoins to be valid, they too must meet this criteria. Those who aren’t familiar with the Bitcoin may feel very wary about them and rightfully so. There is a lot to learn and digest about them, but that is the same for anything newer.
How does it work exactly? Well a transaction is a transfer of value between Bitcoin wallets that are included in the block chain (a continuously growing list of records, timestamped data). The Bitcoin wallets keep a secret piece of data called a private key or seed. These are used as the signature of the transaction, providing mathematical proof that they have come from the right owner of the wallet.
The Bitcoin solves many of the banking issues we are all dealing with on a daily basis. In short, the Bitcoin is just digital money. Banks like Bankera are jumping on board and building a digital bank and infrastructure, one they believe will last in this blockchain era. Before being skeptical of this digital coin offering, educate yourself on the Bitcoin and the digital bank.
Due to the virtual nature of the Bitcoin, there are some standout advantages that other currency types don’t have. However, because digital currencies are fairly new and not tested as well, users should be careful and weigh out their benefits and risks. With that said, let’s look at some of the unique and positive possibilities that the Bitcoin offers:
- More Anonymity – Bitcoin purchase are discrete. Unless a user gives out their transaction information on their own, purchases are never associated with him/hers personal identity. Much like cash-only purchases, the Bitcoin cannot be traced back to the user. In fact, the digital signature or Bitcoin address that is generated during the transaction changes with each transaction.
- No Third-Party Interruptions – one of the most publicized advantages of the Bitcoin is that governments, banks and other financial intermediaries do not have any way of interrupting user transactions or placing holds on Bitcoin accounts. Transaction are only peer-to-peer. There is a greater amount of freedom than with other currencies.
- Not Taxed – because there is no way for a third party to identify, track or interrupt transactions, sales tax is not added to any purchase.
- Low to No Transaction Fees – standard wire transfers and other transactions of other currencies typically involve fees and exchange costs. Again, since Bitcoin transactions have no middle man or government involvement, the cost of each transaction is very low. This is a major plus for travelers. Transactions or transfers of money happen very quickly so there isn’t the typical inconveniences of waiting periods that occurs with other currencies.
- Alternate Payments – though this isn’t much different than other currencies, it is still a positive that Bitcoin users can pay for their coins anywhere they have internet access. Like other institutions, you won’t have to travel to a bank or store to buy a product. The only difference is that personal information is not necessary to complete your transactions.
Bitcoin has many advantages, though, as with anything new, just do your research and learn what is right for you and your money investments before diving in to the deep end of the pool.
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