Understanding Bitcoin
Correspondent | Wednesday December 21, 2016 22:50
It’s the first example of a growing category of money known as cryptocurrency.
What makes it different from normal currencies?
Bitcoin can be used to buy things electronically. In that sense, it’s like conventional dollars, euros, or yen, pulas or rands which are also traded digitally.
However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralised. No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money.
Who created it?
A software developer called Satoshi Nakamoto proposed bitcoin, which was an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
Who prints it?
No one. This currency isn’t physically printed in the shadows by a central bank, unaccountable to the population, and making its own rules. Those banks can simply produce more money to cover the national debt, thus devaluing their currency.
Instead, bitcoin is created digitally, by a community of people that anyone can join. Bitcoins are “mined”, using computing power in a distributed network. This network also processes transactions made with the virtual currency, effectively making bitcoin its own payment network.
So you can’t churn out unlimited bitcoins?
That’s right. The bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the Founder of Bitcoin.
What is bitcoin based on?
Conventional currency has been based on gold or silver. Theoretically, you knew that if you handed over a dollar at the bank, you could get some gold back (although this didn’t actually work in practice). But bitcoin isn’t based on gold; it’s based on mathematics.
Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available, so that anyone can check it. The software is also open source, meaning that anyone can look at it to make sure that it does what it is supposed to.
What are its characteristics?
Bitcoin has several important features that set it apart from government-backed currencies.
l It’s decentralised
The bitcoin network isn’t controlled by one central authority. Every machine that mines bitcoin and processes transactions makes up a part of the network, and the machines work together.
That means that, in theory, one central authority can’t tinker with monetary policy and cause a meltdown – or simply decide to take people’s bitcoins away from them, as the Central European Bank decided to do in Cyprus in early 2013 or in Greece in 2015.
If some part of the network goes offline for some reason, the money keeps on flowing.
l It’s easy to set up
Conventional banks make you jump through hoops simply to open a bank account. Setting up merchant accounts for payment is another Kafkaesque task, covered by bureaucracy. However, you can set up a bitcoin address in seconds, no questions asked, and with no fees payable.
l It’s anonymous
Users can hold multiple bitcoin addresses, and they aren’t linked to names, addresses, or other personally identifying information.
l It’s completely transparent
Bitcoin stores details of every single transaction that ever happened in the network in a huge version of a general ledger, called the blockchain. The platform blockchain.com tells all.
If you have a publicly used bitcoin address, anyone can tell how many bitcoins are stored at that address. They just don’t know that it’s yours.
There are measures that people can take to make their activities more solid on the bitcoin network, such as not using the same bitcoin addresses consistently, and not transferring lots of bitcoin to a single address.
l Transaction fees are microscopic
Your bank may charge you a P250 fee for international transfers. Bitcoin doesn’t.
l It’s fast
You can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.
l It’s non-repudiable
When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.
Where can one buy bitcoins?
There are bitcoin traders or exchanges all around the world where one can purchase bitcoins using their conventional currency either dollars pulas or rands. There are a few in South Africa. Unfortunately in Botswana we haven’t got anybody in that space as yet, therefore we are forced to use a trader or exchange in South Africa as it’s the nearest to us. Otherwise most around the world are online, therefore one can buy bitcoins from them either using their credit card, their debit card or simply wiring money to them through telegraghic transfer.
What is blockchain
The blockchain is a revolutionary technology that is changing the way banking will be done in the near future. This is the underlying technology that underpins bitcoin. The way we store and exchange content was completely democratised by the internet and so too blockchain will completely change the way we store and exchange value using digital currencies like bitcoin. The internet took almost 30 years to become such a central part of our daily lives and bitcoin and its underlying blockchain technology will have the same impact but it might take a shorter time to change our lives dramatically.
Benefits of Blockchain – Distributed ledger
National Identity – a lot of people around the world have no identity documents and blockchain technology can be used as a ledger to keep track of all these people to make delivery of services much easier, therefore improving efficiency and service delivery in government departments. Digital identity will be recorded forever
Blockchain technology can consolidate some existing systems such as similar ones in government as updates to the ledger happen instantaneously, there’s a proof of transactions across all systems without the need for a middle man. Blockchain technology stores tamper proof verifications of transactions and uses a combination of public and private keys to determine who can see details of those entries made.
Words that define blockchain technology
l Secure
l Speedy
l Cost effective
l Decentralised
Countries that are already adopting blockchain technology:
l Dubai
l Japan
l South Korea
l China
l Russia
l Uk
l Usa
l Singapore
l Australia
l South Africa
This technology is has triggered some thought processes in smaller economies like Ghana, Estonia, Georgia, Uganda, Kenya including Zimbabwe.
Governments and businesses around the world appreciate that this technology has opened doors for budding engineering, software and finance professionals and will be forced to look at things differently and apply their minds to bring out new cutting edge technologies and ideas. The possibilities are exciting and endless. Blockchain technology was an item of discussion at World Economic Forum in Davos, Switzerland in February 2016 where Commonwealth Secretariat officials advised Commonwealth governments to adopt blockchain technology for record keeping (this is one of the many functions of this underlying bitcoin technology).
Blockchain technology is probably the one application that will help curb corruption that is crippling world economies, especially Africa including Botswana, as transactions cannot be copied, manipulated or even changed once they have gone through blockchain system.
It’s extremely important and worth it to understand how this distruptive concept works. Although its end user experience is simple and quick, the underlying technology is extremely complex. In a traditional non-blockchain transaction, usually there’s a trusted third party – in this case a bank, to verify the transaction, but with blockchain, it is the network that verifies the transaction thus no need for a middle man.
That’s the beauty of bitcoin and its underlying technology because it gives nobody power over the masses as it is the case with the present current financial system. BITCOIN gives power to people to be their own bank, control and spend their money anyhow they wish.
For the first time ever in the history of human kind that anybody, anywhere in the world can send or receive any amount of money instantly with no charges and nobody including government can do anything to stop them. Now that’s true FINANCIAL FREEDOM………
The current financial system creates such inequality as only the few elite are in control and in possession of the world’s wealth.
Therefore, I suggest that people who are writing ill-informed articles on this subject matter like Richard Harriman of Consumer Watchdog, must research and fully inform themselves first on the subject before misleading the nation by lumping it with all the other scams that have hit Botswana in the past.
This is different because even big banks around the world are investing millions of dollars in bitcoin and its underlying blockchain technology, ie Barclays /ABSA, FNB / RMB, Standard Chartered, CITI Bank, Santander Bank, Bank of Tokyo, USSA, BBVA to mention a few, including massive financial services companies like JP Morgan, Accenture, Nasdaq, Visa and the biggest of them all New York Stock Exchange keep on pouring millions and millions of dollars into this technology. All this shared information can be verified as it’s available on the public domain or the websites of the mentioned establishments.
Three ways of acquiring bitcoins:
l Buying bitcoins from a bitcoin trader by converting their pulas or any other currency they have into bitcoins.
l Accepting bitcoins as method of payment, if one is a merchant or a business, and
l Mining bitcoins by joining one of the bitcoin mining companies around the world – they are listed on relevant websites on the web.
A bitcoin wallet is opened online and used just like online banking. A bitcoin debit card, which is a normal Visa or Mastercard, is used to transact normally. Visa has invested millions of dollars on bitcoin startup companies in various parts of the world. This information can be verified through various platforms on the web including the visa website itself.
The bitcoin debit card can be used at any point-of-sale system, from grocery stores to petrol stations, even restuarants or coffee shops, including airlines. Withdrawal of cash at any local ATM with a bitcoin debit card can be done as well. Money transfers take minutes to clear with bitcoin accounts. Global payments can be done in minutes. No need to wait days like you do with banks for money to clear.
Fees are standard at 0.01%, whether you transfer P100 or P1 million. Most countries have no tax laws on bitcoin as it is a decentralised system. Governments or any authorities for that matter cannot freeze bitcoin accounts, because they don’t own the network. All bitcoin transactions are recorded on the blockchain which is a public ledger and it is transparent.
Bitclub Network
Bitclub Network is a global wealth company for the digital currency market and it is one of 21 big mining pool / companies around the world. This information can be verified on the blockchain platform www.blockchain.com
Bitclub Network has combined two hottest trends of cryptocurrency (Bitcoin) and network marketing which is one way of creating income for yourself irrespective of the fact that you are there or not.
Learning how to make your money work for you and not the other round, is what is being recommended by self-made billionaires around the world like Robert Kiyosaki and USA President-elect Donald Trump. This is the same model that is being applied fully by Bitclub Network. Therefore, Bitclub Network is not only a bitcoin mining company but it’s also a Multi-Level Marketing (MLM). I need to mention or highlight the fact that by the way, we engage in network marketing everyday of our lives as we continually recommend places of service or products that we happy with, but we just don’t get paid for it.
There’s nothing wrong with network marketing. People need to give it time to understand the concept before they critisise it.
BitClub Network is not owned by any single person or entity. It’s a team of experts, entrepreneurs, professionals, network marketers, and programming geeks who have all come together to launch a very simple business around a very complex industry. Anyone can join BitClub Network and begin earning a passive income by taking advantage of our expertise in Bitcoin mining and other Bitcoin related services.
Our Mission: To help YOU cash-in on Bitcoin as it becomes a mainstream global currency.
BitClub Network is a community of people who have come together to support Bitcoin and other digital currencies (also called crypto currencies or virtual currencies).
We are helping to educate, provide services for, secure, protect and ultimately profit from this emerging technology. There’s a bitcoin / blockchain conference billed for Africa from March 1-3, 2017 in Johannesburg, South Africa. This is one source of unlimited knowledge and information on this inevitable change of the 21st century.
*SETHUNYA R. KOPONG is a Bitcoin mine