Satoshi Nakamoto, the founder of Bitcoin had envisaged Bitcoin as a medium that would be facilitating daily transactions. The idea of having a decentralized cryptocurrency was of eliminating the centralized control of the money that relied on the hands of government agencies to ensure speedy transactions.
But now, when more than a decade has been passed since its discovery, questions are being raised if the cryptocurrency really lived up to that promise or not. Even today it is not difficult to observe that not many transactions are taking place with bitcoins being their medium of exchange. Still, the idea of having an alternative of another currency, outside of the hands of government agencies certainly seems powerful.
Noting the latest developments in the world of Bitcoin, we can see a glimmer of hope that Bitcoin might after all keep its promise.
There has been a significant increase in the number of places that have agreed to accept Bitcoin with its evolving technology and name recognition. You’ll be amazed by seeing the list of things that one can buy using bitcoins!
The primary goal with which the bitcoins were designed, is to offer numerous advantages to its users over the traditional payment methods.
I’m here to help you in taking a closer look at the advantages of using Bitcoins for making payments preceded by the explanations of what Bitcoins and cryptocurrencies actually are. Understanding the designs and principles of Bitcoin will help in understanding the advantages of using bitcoins for making payments.
We are going to discuss:-
- Several advantages of Bitcoin transactions like low transaction fees, quicker processing, etc.
- Significance of Bitcoin transactions for international transfers
- Technological advances in Bitcoins like Lightning Network
- .Ability to make transactions without banking.
What Is Bitcoin?
Bitcoin is nothing but a decentralized cryptocurrency system that makes transactions with the help of digital units of exchange known as Bitcoin. It was discovered in 2009. Over time it has been evident that the Bitcoin network is gradually dominating and even defining the world of cryptocurrency while spawning a legion of altcoin followers.
Bitcoin is also being interpreted as an alternative for some users to government currencies like the U.S. dollar, the Euro, the Indian Rupee, etc., or even from the expensive metals considered to be pure commodity currencies like gold coins, silver coins, etc.
One of the reasons why people are getting attracted to Bitcoin rather than other types of cryptocurrencies is because of the decentralized status it has.
The decentralized status of Bitcoin refers to that Bitcoin is not controlled or regulated by a central authority. This is a major element that differentiates it from fiat currencies that are issued by the respective central banks and backed by the countries of those banks as well. Institutions like banks also facilitate the disbursement of Fiat currencies but only those which are beholden to their respective government for all of their operations.
The creation of Bitcoin and its disbursal does not show any dependency on government fiat.
There is a private network of computers linked with the help of a shared ledger that processes the payments involving Bitcoin. Each of those transactions is simultaneously recorded on what is called a blockchain, on that every computer that is responsible for updating and informing all accounts.
The blockchain is engaged in serving as a distributed ledger along with obliviating the need for any sort of central authority in order to maintain similar records.
Origin of Bitcoins
Unlike Fiat currencies, Bitcoins are not issued by a central bank or a government system. Rather, they are ‘mined’ through a process named Bitcoin Mining. It is done by a computer with the help of certain algorithms like solving a mathematical problem and is used to verify transaction blocks to be added to the blockchain.
One can also purchase Bitcoins using standard national currencies that can easily be placed into a wallet called bitcoin wallet which is always easily accessible via any smartphone or a computer.
Advantages of using Bitcoins for Making Payments
Now, after understanding what Bitcoins are, what Blockchains are along with the Origin of Bitcoins, let us go through the primary section of this blog that is the advantages of Bitcoins.
It is one of the most appreciated advantages of Bitcoin. Bitcoins facilitate the feature of User autonomy. We all know that conventional fiat currencies are subjected to numerous risks and have multiple restrictions- as banks get affected by the boom and bust cycles taking place in the economy. More often than less, such situations might result in bank runs or crashes as we all have witnessed happening to them in the past. This implies that users don't have the same control over money as they think they do.
Be it just in books, but Bitcoins at least promise user autonomy because their price is neither linked nor dependent on specific policies given by the government. Hence we can very much say that the users who own cryptocurrency have autonomy over money.
Here comes another advantage of Bitcoin. Most online transactions need some information for the identification of the person who is conducting the particular online transaction.
For example, when one person transfers money to another person, the verification of both of their identities happens first. In the same way, online purchases also make sure to ask the customers to enter their identification before the process. This verification might not only prevent crimes but also places an intermediary. This intermediary is firmly in charge of the conducted transaction.
Bitcoin transactions are pseudonymous. It means that they are not entirely autonomous. But the positive aspect is that they can only be identified when one uses a blockchain address. One can have numerous addresses, in a similar way one can have numerous usernames and passwords concerning a single account. It does not require Internet Protocol (IP) addresses or any other information for identification during the transaction.
Peer-to-peer basis of transaction
The Bitcoin system of payment is entirely peer-to-peer i.e. users are capable of sending and receiving payments to or from anyone across the global network all around the world. Till the time they send or receive bitcoin from an official or regulated exchange or institution, the parties to the respective transaction have no need of acquiring approval from an external source or authority.
No banking fees charged
Indeed fiat currency exchanges are charging what they call “maker” and “taker” fees along with occasional deposit and withdrawal fees, Bitcoin users are not subject to the litany of traditional bank charges that are concerned with fiat currencies. This means that there will be no account maintenance or in other words minimum balance fees, no overdraft charges, no returned deposit fees among many other kinds of fees. This makes it one of the highlights of the advantages of Bitcoins and why one must make Bitcoin payments.
Low transaction fees for international payments
Standard wire transfers along with foreign purchases generally involve exchange costs and fees as well. As there are no intermediary institutes with Bitcoin transactions and neither there is any government involvement, the transaction costs are most of the time lower when compared with bank transfers or bank transactions. This can turn out to be a major advantage for those who travel a lot. In addition, transfers involving bitcoins are faster and eliminate the inconvenience caused by typical authorization requirements and wait periods.
Mobility in payments
Just like numerous online payment systems, users of Bitcoin are capable of paying for their coins from any place that has Internet access. This implies that there is no need for purchasers to travel to their respective bank or to a specific store for buying a product. However, unlike online payments made using U.S. bank accounts or credit cards, there is no need for personal information for the completion of any transaction.
Being immutable is one of the characteristics that the Bitcoin blockchain possesses. Hence, those transactions which involve the use of blockchain are irreversible and cannot be amended if a third party wishes to inclusive of any government entity or any financial services agency. Additionally, there is no possibility to file a charge-back for bitcoin which is already sent to someone else. The one and the only way of reversing that action, in a manner of speaking, of reversing Bitcoin transactions is to do so by having the recipient send back the original bitcoin.
Bitcoin, not being a physical currency, gives no possible loophole to thieves to palm it off the holder. Hackers might steal a person’s cryptocurrency but only if they know the private keys to the holder’s wallet. However, with maximum security, it is almost impossible to steal bitcoin on technical grounds. Indeed there are reports of hacks taking place at cryptocurrency exchanges, but Bitcoin’s exchanges have remained impervious to any of such breaches. Hence, Bitcoin transactions conducted between two, or among multiple addresses are considered secured.
As users are capable of sending and receiving bitcoins by using only a smartphone or a computer, Bitcoin is theoretically available to users even without having access to traditional banking systems, credit cards, and other payment methods. Because of this advantage of Bitcoins, people tend to feel like giving Bitcoin transactions a chance.
So, this blog was all about the advantages of using bitcoins for making payments. Starting from what Bitcoin is, blockchain, and the origin of Bitcoins we got a better view on understanding the basics of this cryptocurrency.
Today technologies are changing with the speed of light and we ought to be at par with it in order to succeed. Bitcoins and other cryptocurrencies are nonetheless most latest of them hence knowing more about them, especially how we can be benefitted from them becomes the need of the hour. I hope that I was able to do justice by delivering that knowledge to you by sharing the advantages of making payments using bitcoins.