Bitcoins – Should You Use Them?

Bitcoin was launched as a private initiative in 2009. Unlike traditional currencies, such as the Euro, Sterling and Dollar, it is not controlled by a central monetary authority. Instead, it is supported by a peer-to-peer network on users’ computers. This is similar to how Skype, a video chat service, works.

The basic unit of value is Bitcoin. However, every bitcoin can be divided into satoshies. one Satoshi equals one hundred millionths of a bitcoin (i.e., a bitcoin distributed to eight decimal places).

Bitcoins and satoshies can be transferred from one internet user to another to pay for goods or services at almost zero cost. This allows you to make international transfers without having to mess around with exchange rates and cumbersome bank charges. Bitcoins can be bought and sold for traditional cash at special exchanges.

Bitcoin wallets

To use Bitcoin, you need one wallet, a special piece of software where you store, send and receive bitcoins. There are three kinds of wallets, software wallets, mobile wallets and web wallets.

Software wallets are installed on your computer and they give you full control over your wallet. Mobile wallets is installed in your smartphone or tablet and allows you to use Bitcoin for daily transactions in stores and supermarkets by scanning a quick response code (QR). Web wallets is located on the World Wide Web, ie. that they are a form of cloud storage.

Payments using bitcoins are super simple. They can be made from wallets on your computer or smartphone just by entering the recipient’s address, amount and then pressing send. Smartphones can also get a recipient’s address by scanning a QR code or by bringing two phones that contain near field field (NFC) technology, a form of radio communication, close together.

Receiving payments is just as easy … all you have to do is give the payer your bitcoin address.

Protecting your wallet

A bitcoin wallet is like a wallet full of cash. To reduce the risk of loss, store only small amounts of bitcoins in your computer or smartphone and store most of your bitcoins in a more secure environment, e.g. An offline wallet. Assuming your wallet is encrypted, an offline backup allows you to recover your wallet if your computer or smartphone is stolen.

Encrypting your wallet allows you to set a password to be entered before funds can be drawn. However, it is impossible to recover a bitcoin password if lost. Therefore, you must be absolutely sure that you remember your password. If the value of your bitcoins is significant, you can store the password in a bank vault or wherever you keep important papers.

To be as secure as possible, save off-line backups in multiple locations using various media such as USB flash drives and CDs.

As bitcoin runs on software you download to your computer (PC or laptop) or smartphone, you need to regularly update this software to keep your wallets and transactions secure.

Benefits of bitcoins

Bitcoins have several significant benefits:

1- You can send and receive unlimited amounts of money right away at any time to and from anywhere in the world.

2 treatment costs no fees or only very small fees.

3-bitcoin transactions are irreversible, protecting sellers from the fraudulent chargebacks that are becoming more common with credit cards.

4 payments are made without personal information being exchanged, providing strong protection against identity theft.

The 5 reception and payment process is completely neutral, transparent and predictable.

Disadvantages of bitcoins

However, using bitcoins has several drawbacks:

1-they are not yet universally accepted and therefore cannot be used everywhere.

2-their value is unstable because the number of bitcoins in circulation is quite small, so relatively small transactions can significantly affect their price.

Should you use bitcoins?

The short answer is NO or at least not in a bigger way yet.

Bitcoins are fungible assets with durability, portability, divisibility and scarcity, ie. they have all the hallmarks of conventional money (euro, dollar, pound, etc.). They have value so they can be exchanged for other currencies by exchanges.

Therein lies the danger. There are times when the value of bitcoin can fluctuate widely, by 50% in one day. So as a store with value, they are not for the faint of heart. In other words, you should have no more money than you can afford to lose in the form of bitcoins.

However, a wallet with small amounts of bitcoin in it could be used for smaller daily transactions that would help you familiarize yourself with Internet currencies. As the amount of bitcoins in circulation increases, their value viz-a-viz other currencies should stabilize and you can start using them for larger transactions.