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Everything You Need to Know About Blockchain

Everything You Need to Know About Blockchain

Blockchain technology is becoming increasingly popular, especially in the financial and tech industries. That then means that a growing number of people are keen to understand what it is and how it works.

This new technology is rapidly entering our everyday lives, from cryptocurrency to blockchain games. In this guide, we'll explain everything you need to know, including both the advantages and disadvantages of digital currency.

What is Bitcoin?

Bitcoin is one type of 'cryptocurrency' (digital currency), where cryptography (a kind of computer science) creates money out of nothing. Of course, it isn't really nothing; each Bitcoin has to be mined by solving computers' problems.

Other cryptocurrencies have been created with different levels of success. To understand what Blockchain is and how it works, we need to go back a few steps and compare Blockchain to traditional banking.

Where Can I Use Bitcoin?

There are a growing number of companies and individuals who accept Bitcoin as a form of payment.

Some sites that accept Bitcoin are:

  • Overstock.com
  • Reddit
  • Steam (game platform)
  • Microsoft

Did You Know? The first purchase ever with Bitcoin was when someone bought two large Papa John's pizzas for 10,000 Bitcoins in May of 2010. Today that would be about 90 million dollars!

How Can I Earn Money with Bitcoin?

As one might imagine, there are a few ways to make money with Bitcoin.

The simplest way is to accept it as payment for goods or services (like what you can do at Overstock.com). Another way is to buy low and sell high, basically taking advantage of the rapid fluctuations in price that happen all the time with cryptocurrencies generally and even more often with Bitcoins specifically.

There are also companies like Coinbase that will help you get started investing in cryptocurrencies (and they'll give you $10 free when you invest $100).

Mining Bitcoins

When you' mine' your own bitcoins, you'll be solving blocks yourself using your home hardware. If successful, this method could actually make you a large sum of money.

However, mining for new bitcoins is becoming increasingly difficult and requires more and more complex computer systems to solve the problems necessary to get the block rewards for successful mining. With this difficulty comes a high cost in terms of hardware, electricity, and time.

Considering that even mining companies with warehouses full of hardware aren't making much money anymore, it might not be worth it at all unless you have free power or your hardware costs are relatively low.

Bitcoin vs. Traditional Banking

In traditional banking, transactions are recorded by a 'middleman,' which means that you have to rely on the bank not to lose your money or let fraudsters in. If someone doesn't like you, they can just go into your account and take all your hard-earned fifties. Banks also charge fees for sending money abroad or receiving it at all, and it makes using money tedious, right?

Luckily there is an alternative! With Blockchain, no intermediary is needed during transactions because both sender and receiver are part of the network. Transactions are recorded on multiple computers, so the others will still be safe if one is hacked. Better yet, since there's no go-between, there are no fees!

If you're thinking 'Wow! This technology sounds amazing!', then it's time to look at both the advantages and the disadvantages of blockchain currencies.

Advantages of Blockchain

  • Fast transactions for a relatively small amount of money. For example, if you wanted to send money from the UK to Australia, it would take days for the funds to arrive, and the fees would be high. With Blockchain, you can do it in under ten minutes for only a couple of dollars.
  • The system is much safer since there's no middleman; this means hackers won't be able to hack all your information from one bank.
  • You have complete control over your money, and no one is able to freeze it or stop you from using it.
  • Transactions can't be faked because they're recorded on multiple computers and signed with cryptography (a type of computer science).

Disadvantages of Blockchain

  • One major problem is that when computers are mining for cryptocurrencies (in this case, Bitcoins), they take up a lot of power and resources.
  • Blockchain can't process as many transactions per second as traditional banking systems like Visa or Mastercard.
  • Another issue is speed; when you send someone money in the form of cryptocurrency, it may take ten minutes for confirmation before your friend can use their money.
  • Bitcoin is very popular but also very volatile; many people buy it hoping for an increase in value and end up losing a lot when they sell.

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