The idea of cryptocurrency came up as a proposition to devise a peer-to-peer electronic currency system in the year 2008. It was a pretty obscure idea in the initial years. Bitcoin gained widespread popularity during its bull run in the year 2017 when the value showed a record growth of over 300% in a period of a few months. The value went up from around 5000 USD to 20,000 USD in three months. Since then, several cryptocurrencies with more sophisticated algorithms have come to up- Ethereum, Litecoin, Ripple to name a few.
Despite all the new currencies coming up regularly- Bitcoin has retained its popularity. With an investment of 1.5 billion USD on this currency by the much-acclaimed Tesla CEO Elon Musk, Bitcoin has made it to the headlines once again. Crypto has the potential to make transactions easy and efficient. To know the reasons behind it let us leapfrog to the most important questions- Why is Bitcoin so popular? What are the reasons to use Bitcoin instead of traditional currencies? Let us find out.
What makes Bitcoin a better alternative to normal currency?
Bitcoin uses a cutting-edge technology that is known as the blockchain database. The blockchain is a technology where a transaction after being computed and approved is stored as a block. Newer transactions are recorded as blocks and are linked to previous blocks (thus the name blockchain). Unlike traditional ledger systems, Bitcoin blockchain is much more reliable and efficient, as the database is controlled in a decentralized manner. It means, the blockchains are stored in computer networks spread across the world. This system minimizes the inaccuracy of the traditional ledger system, as all the blockchains are stored in multiple computers (also known as ‘nods’), so wrong calculation becomes virtually impossible because that data is always referred to the blockchain database stored in other computers somewhere else. You can also take the reference from the gold trading app to clarify your doubt as per your requirements.
The blockchain has made transactions more time-efficient by removing the formalities, waiting time of approval of the traditional banking system. It is for this reason Bitcoin is more preferable while making transaction across borders, which is a normal banking system takes a couple of days. Through Bitcoin, it is possible to make such a transaction in few minutes.
What are the reasons to use Bitcoin?
We have summed up the advantages of using Bitcoin for transactions.
- Bitcoin can be purchased easily. You can use your debit card, your credit card, PayPal, or any form of digital currency, even bank transfer to purchase Bitcoins or other cryptocurrencies. Once you made your purchase it is easy to make transactions across the world, as one of the most important facts about Bitcoin is that, this currency is accepted universally.
- Secure database for transactions. As mentioned above, the transactional details are stored in blocks that are stored in contiguity to other blocks. This means that any alteration made to any of this block would require the other blocks in the chain to be recomputed. The data entered is irreversible. This makes the blockchain system virtually flawless.
- Anonymity in the process of transactions. The owners of Bitcoin do not require to have an account with his/her personal information tied up to that account (via the email address, etc). Instead, what it requires is an address for location and a pair of an open private key. The owner of a sum of Bitcoin is the one who owns the private key. Through this key, the owner of the crypto-cash can sign and approve any transaction. Thus, it is possible to make a transaction without revealing the identities of the parties involved.
- Secure transaction is ensured through cryptography. To prevent security issues such as theft, Bitcoin uses the technology of open key cryptography. In this system, every address is unique and registered within the system with its own set of keys. Thus, every Bitcoin wallet has its unique key which can be used to sanction transactions. This makes it impossible for an outsider to make any transaction without the knowledge of the user.
Bitcoin has reached a new high of 50,000 USD in 2021. Consider all the possible advantages and disadvantages before investing.