What is the best proof of how much cash you own? Bank statements or the number reflected on your passbook will suffice, but don’t you think it is better if you are actually and physically holding the money?
Thanks to technology, money and currency found its way online and it goes by the name bitcoin.
Here’s what you need to know about bitcoin, how it works, why you should consider it, bitcoin price in Canadian dollars and everything else in between.
What is bitcoin?
It all started in 2009 when software developer Satoshi Nakamoto proposed an electronic payment system based on mathematical proof.
Bitcoin is a form of digital currency that is created and held electronically using a bitcoin address and private key, which are sequence of letters and numbers that are randomly generated. Unlike normal currencies, bitcoin is not controlled by the Central Bank or any single financial institution, which explains why many people are considering this type of currency. Merchants are also slowly starting to accept bitcoins, which means you can buy pizza, get a manicure, or even pay for web hosting services using this type of currency.
Here are some of its characteristics:
- Decentralized, which means bitcoin network is not controlled by a central authority. In fact, every machine that mines and processes bitcoin and its corresponding transaction is part of the network.
- Easy to set up bitcoin address, which you can do in seconds.
- Divisible because you can only send part of a bitcoin on the bitcoin network.
- Transparent because every detail of every single transaction can be seen in a general ledger called blockchain.
- Minimal transaction fees compared to banks.
- Fast processing of transaction where the money can arrive in a few minutes.
- Non-repudiable, which means once the bitcoins are sent, you cannot get it back unless the recipient sends it back.
How does it work?
In a user perspective, Bitcoin provides a wallet that enables users like you to send and receive bitcoins. Behind it, the entire network is sharing a public ledger called blockchain, which contains every transaction processed. This is protected by digital signatures with corresponding bitcoin address; hence minimizing identity theft.
It starts with an input, or a record of bitcoins, then the amount of bitcoins to be sent to a particular address, and the output, which is the bitcoin address of the recipient.
Nonetheless, keep in mind that there are only records of bitcoin transactions and not bitcoins per se. Issuance of receipt is not applicable when you make a transaction using bitcoins. Nonetheless, several changes are introduced in the newer versions of payment processors, including the issuance of receipts and confirmation of web pages.
Why should you use bitcoin?
Bitcoin is a new form of currency and surely, many people are wary of using it. Nonetheless, here are some good reasons why you should consider bitcoins:
- The transaction fees for bitcoins are either minimal or free since there are no third-party clearing houses involved. Also, bitcoins are not tied to any country not subject to regulation, thereby making international payments more affordable.
- Bitcoin currency is decentralized, which means you own it and the Central Bank cannot take it away from you – unlike what happened in Cyprus financial crisis in 2013.
- Possibility of fraud is minimized because you don’t have to give up any private information about you, except your public key. You will be asked to “sign” the transaction by combining public and private keys, which in effect, creates a mathematical function that serves as proof that you made such online transaction. This means you can make any purchases online and not worry about compromising your information.
- Bitcoin currency is not affected by inflation. The design of bitcoin is limited to 21 million coins only.
- There is privacy in the transactions made while anonymity is maintained. Even if all transactions are recorded in the blockchain, no one knows who purchased what since the names of the buyers and sellers are not revealed – unless you use the same bitcoin address in all your transactions.
- You own bitcoin, both the private and public key used in every transaction. No one can take the cash away from you without your consent.
- You have the ability to create your own money by buying bitcoins in the open market. In case you have sufficient computing power, you can start mining your own bitcoins.
What is the value of Bitcoin in Canada?
Similar to normal currency, the value of bitcoin when exchanged to a particular currency varies. Consequently, the value of 1 bitcoin to cdn or any other currency around the world could change every second.
For instance, as of this writing, 1 bitcoin to CAD has an index value of $8630.81 and 95 percent stability, with almost six percent decline over the last 24 hours. The value of for the last 52 weeks for BTC to CAD went up to as much as $10005.15 and as low as $905.92.
Take note that just like in normal currencies, buy and sell of Bitcoin price in Canadian dollars are different.
Tips to ensure security and privacy in bitcoin network
- Make sure you control your private keys by using wallets or virtual bank accounts that allow you to control it.
- Choose a bitcoin wallet that downloads the whole blockchain for added privacy.
- Make it a habit to create a new bitcoin address for every transaction or at least don’t use the same address in all of your transactions.
- Always create multiple secure backups of wallets that are kept in separate physical location.
- Use different wallets for different sums of money.
The future of bitcoin currency is still unclear. It may be unregulated now, but there is always a possibility that the Central Bank and the government will interfere for control and taxation purposes. Nonetheless, using bitcoin is worth trying because of the ease and convenience it brings.