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Author : Bitcoins Basics 101 PDF Ebook by DAVID DODGE and BRIAN DIXON
Other virtual currencies offer these to an extent, but Bitcoin was the first to use a peer-to-peer network instead of a central authority in control of the currency. When you add in advanced encryption and anonymity, it’s easy to see why Bitcoin is growing so quickly all over the world - and will likely continue to experience growth for the next decade at least. As forced cutbacks and problems with existing financial systems occur around the world - like in Greece, for example, with austerity measures put in place - Bitcoin is going to become more useful for billions of people. Because Bitcoin is not tied to the current financial institutions - like banks and governments - the people are more likely to latch onto it and use it because of their hatred for what’s been done to the world economy. At the same time, if Bitcoin is to continue growing, it’s going to have to come to terms with governments and financial institutions around the world. Because if not many people accept Bitcoin as a form of currency, it’s still necessary to transfer bitcoins to your currency of choice before you can use it. This is why it’s going to be necessary for Bitcoin to “grow up” eventually and learn to interact with current financial systems a little better. As this happens, Bitcoin is going to become even more popular around the world and experience a huge growth spurt. In the far future, some fiat currencies may suffer from inflation and be dropped entirely as people begin to use Bitcoin instead.
This may be decades away, but there are signs pointing to this happening. Banks are already collapsing around the world, but now people have an alternative - Bitcoin. It’s going to be very interesting to watch the growth of Bitcoin as more and more financial institutions go under. Bitcoin Strengths and Weaknesses. While Bitcoin has a lot of strengths, there are some weaknesses for the cryptocurrency as well. We’re going to take a look at both the pros and cons of Bitcoin so that you can get a better understanding of where this virtual currency is going to head in the years ahead. The fact that it’s already growing in popularity so rapidly is a good sign, but there are hurdles that Bitcoin is going to have to get over if it’s to survive and thrive in the future. Strengths. First, let’s go over some of the main strengths of cryptocurrency in general and Bitcoin specifically. Anonymity and Privacy. One of the big strengths of Bitcoin currently is that it offers virtual anonymity and a lot more. privacy than is found in current financial systems. Bitcoin uses hash addresses to send and receive money, and these hashes or addresses can be changed from transaction to transaction. Because of that, it’s entirely possible for two parties to be completely anonymous when conducting their transactions. Because addresses (hashes) can be created for each transaction, it makes it really difficult to track and trace financial activity of any single person in the network.
And, unlike cash which is also private to an extent, you can use Bitcoin online to do virtual transactions. Add to that the fact that there’s no central authority keeping tabs on all transactions, people can feel safer about their privacy. No transaction fees. When you use a credit or debit card, the processor charges a transaction fee. The charge is given to the merchant which can cut down on their profit margin considerably. However, Bitcoin doesn’t have transaction fees - at this time. When 21 million bitcoins are produced and released into the world this may change, but for now Bitcoin doesn’t charge a transaction fee. When Bitcoin mining goes away, there’s going to be no financial incentive for people to verify transactions by solving a block and adding it to the block chain. At that time, there’s a good chance that a low BTC transaction fee may be instituted in order to make sure others still verify transactions. Giving them a cut of the transaction fee will enable the system to continue. No central governing authority. When you purchase something around the world, you’re typically taxed by the government for the transaction. Currently, Bitcoin is not recognized as money by any government so it is not taxed. Most Bitcoin transactions could be thought of as trades - which are generally exempt from taxation by governments. This is likely to change if and when Bitcoin begins to be recognized as legitimate currency around the world.
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From: Clyde Thorburn