Bitcoin is a decentralized digital currency that was created in 2009 by bitcoin’s anonymous creator, Satoshi Nakamoto. The bitcoin system is peer-to-peer and transactions take place between users directly without an intermediary. Bitcoin can be used to pay for products online as well as in physical stores that have bitcoin acceptance.
The bitcoin network has been running since 2009 and it’s said to be the first cryptocurrency ever developed. There are many people who claim to be the founder or co-founder of bitcoin but no one knows for sure who these individuals are due to their use of aliases and anonymity. It’s also said there may not even be one single person behind it all which would mean bitcoin could actually just be a collective idea worked on by many people.
The bitcoin system is the first decentralized peer-to-peer network in history which means no one owns or controls bitcoin, not even those who created it in 2009. It’s said that bitcoin was designed to have a finite supply of 21 million and right now there are 18.35m bitcoins mined with 12.04 bitcoin mined daily.
Bitcoin is a digital currency that has been taking the world by storm not just within this last year but for years now and it’s still in its infancy as people are constantly learning about bitcoin. One thing to note is there have only ever been 21 million bitcoins created which means bitcoin can’t be devalued when bitcoin is mined.
Top 5 Benefits of Using Bitcoin
– bitcoin is decentralized and not controlled by any one individual or authority
– bitcoin transactions are anonymous so no personal information, such as name, address or credit card numbers can be hacked (only the account number)
– bitcoin uses a public ledger system for historical records of all transactions which cannot be changed after they have been made. This is also known as bitcoin “blockchain”
– bitcoin is a tradable currency that allows people to buy and sell goods and services from anywhere in the world. Currency exchange rates are not subject to individual bank policies but bitcoin values change 24 hours per day much like gold prices
– bitcoin can be invested into any company or service without geographical restrictions.
Top 5 Problems of Using Bitcoin
Bitcoin is a decentralized cryptocurrency. It’s created by bitcoin miners, and it works without the need for banks or central authorities – you know, like that time I was at my cash register counting out coins because there weren’t enough dollar bills to make a change? That felt so archaic! Bitcoin can help us get rid of those inconveniences today. But bitcoin isn’t perfect either- even bitcoin has its own problems.
I’ll be talking about five of bitcoin’s most significant issues: scalability (can it grow), transaction fees (are they too high?), energy consumption (is bitcoin sustainable?), mining incentives (do we have enough people mining bitcoin?) and regulation risks (should governments institute their own regulations on bitcoin?). Follow along below as we explore bitcoin’s problems!
Bitcoin transactions take place in blocks. Blocks are created every ten minutes and can only contain a maximum of one megabyte worth of data, which poses an issue for bitcoin as more people use it- the more difficult bitcoin becomes to scale up due to slower transaction times when there is high volume traffic (again, like I was at my cash register counting out coins because there weren’t enough dollar bills to make change). It also leads to higher fees on transactions per second; today you may pay $0.20 or less on average but if bitcoin were 100x its current size those same transactions could cost around $100 each instead. That seems pretty steep for buying coffee with cryptocurrency…or even sending bitcoin to your friend as a birthday gift!
Bitcoin miners are bitcoin’s ‘lucky finders’
As bitcoin has grown, the mining process of bitcoin has become more complex- and it takes more time. That means that bitcoin miners want transaction fees for their work – but if those transactions cost $100 each then who can afford them? Bitcoin might be out of reach for many people, which is one major problem with bitcoin.
Mining bitcoins uses an incredible amount of energy; in fact, according to Digiconomist’s blog post from November 2017 by now “bitcoin electricity consumption already exceeds the total power consumption of 159 individual countries.” It would take 28% of US households’ annual average electricity consumption just to mine bitcoin at its current size. And bitcoin is on the rise- so bitcoin’s energy consumption will only increase from here, and go up even more as bitcoin grows to meet demand.
Bitcoin miners need incentives in order to keep mining bitcoin. This means that people who pay lower transaction fees for their transactions (which also takes less time) are incentivizing bitcoin miners to mine them by paying higher prices per kilowatt-hour of electricity they use while still getting the same service quality levels; this could potentially create a problem where low-income households can’t afford any bitcoin because it becomes exclusive with high transaction costs, which would undermine bitcoin’s original purpose as an alternative currency for everyone. But if there was some way we could have just bitcoin for bitcoin holders and bitcoin cash for bitcoin consumers, then we might be able to solve this problem.
The government regulation of bitcoin is a major concern in the industry today; with more countries moving towards their own regulations on bitcoin it could potentially hinder or even eliminate bitcoin’s potential impact as an alternative currency worldwide. What can you do about this? Well, one thing would be to contact your representative and voice your opinion! Let them know that bitcoin is important not just because of its value but also because it offers new channels for change- like giving people equal access to global financial markets regardless of where they live without being charged high fees by traditional banks. It may sound hard at first but if enough voices start speaking out then governments will have to listen.