There’s been a lot of talk about Bitcoins in the financial world recently and while some people immediately embraced the excitement of a new digital currency, many have continued to shy away from it because of a lack of any real understanding of what it is and how it actually works.
Are you really missing out, or are Bitcoins just a passing fad? To help make up your mind, here are some of the basics.
What are Bitcoins?
As mentioned above, Bitcoins are a form of digital currency used to make direct payments, without the need for any third parties. It is handled completely online and has become one of the most popular and prominent forms of peer-to-peer payment.
They are gained initially through a process known as ‘mining’, in which new coins are generated in exchange for computers completing processing work. All transactions using the coins are recorded in a public ledger, which anyone can view, eliminating the need for a central bank or administrator.
What are the advantages?
The major advantage of Bitcoins is their accessibility. They can be used to make payment to any country at any time, without needing to worry about borders, time differences, regional holidays and so on, and because these payments are direct, you control your own ‘money’, cutting out any lengthy waiting times while it passes through an intermediary.
Bitcoins are also completely decentralised. There can only ever be a certain amount in circulation at any one time, keeping control over issues like inflation or hoarding. It’s also reasonably safe, as personal information is not required to make a transaction and payments cannot be reversed, making fraud very difficult.
What are the disadvantages?
The main disadvantage of Bitcoins is their lack of mainstream reach. Because they are still somewhat new, a lot of businesses haven’t adopted their use as yet and though the coins themselves have remained relatively secure, some of the exchanges dealing in them have been called into question over the management of their transactions.
As with all fledgling features, it’s also far from perfect, with various tweaks and improvements still to be made in order to give people the reliability and trust they demand from a currency; the volatility that comes with the fluctuating demand and limited number of coins scaring some people away.
Will they last?
It seems Bitcoins have not only grown in popularity in their own right over recent months and years, but they have even triggered the emergence of a whole host of other so-called ‘altcoin’ currencies, suggesting that alternative investments and payment forms could well be the way of the future and at the very least, they won’t be disappearing any time soon.