Virtual currencies are becoming more and more popular these days. Crypto, Bitcoin, Ethereum, digital currency, trading… You may have heard some of the terms, while others may sound Geek to you.
According to a report from New York Digital Investment Group, 46 million Americans own Bitcoins in 2021. Roughly, this makes 22% of the population.
What is a cryptocurrency, and in what ways can you use it in real life? Read on to discover.
What is Bitcoin?
In the world of digital currency, there are two explanations of :
- the token, which is the piece of code that represents ownership;
- the protocol, which is the distributed network for keeping track of balances and transactions.
Rather than using a third-party payment provider, users can transfer payments among themselves without a centralized authority.
There is no tangible asset involved in Bitcoin’s creation and storage – in other words, you cannot hold a Bitcoin in your hands.
Bitcoin was the first cryptocurrency, and it paved the way for several others to follow. It has also enabled a complete turn-around in the way people approach to finance and transactions.
Bitcoin is a completely decentralized network – no single organization or individual controls it. It runs on an open network of specialist computers and is maintained by a group of volunteer programmers.
Additionally, it is limited by an underlying cryptographic algorithm that strictly controls the supply. The number of Bitcoins available remains the same, but they diminish over time until the total number of coins reaches 21 million.
In addition, Bitcoin is completely anonymous in that it does not require any kind of identity checking in order to execute a transaction, which means that those with little trust in banks or other financial institutions can easily get their money and remain anonymous.
Bitcoin can be used similarly to regular fiat currency, with the difference that you cannot hold it in your hand or keep it in a conventional wallet. However, you can’t spend or transfer it without storing it in a cryptocurrency wallet, and you must store it in a specialized one.
The Bitcoin price has experienced spectacular growth but also extreme volatility since it began trading. As an example, bitcoin reached $1,000 in 2017, skyrocketed to more than $19,000 by year’s end, then crashed to less than $3,000. Bitcoin’s price surpassed $68,000 in November 2021, setting new highs for the cryptocurrency.
How to get Bitcoin?
? – you may ask. Yes, you do. You can obtain bitcoin by purchasing it, accepting it as payment for goods and services, mining it, or by getting it as a gift. There are many apps and services to help you obtain bitcoin.
The first step in investing in bitcoin is to create a cryptocurrency wallet. Unlike traditional currency, bitcoin is not stored in the wallet. A wallet is instead a tool that stores your private keys so that you can access your on the blockchain. The wallet can be either hot or cold.
Hot Wallets
The hot wallet exists online or is connected to the internet. Websites and mobile applications offer hot wallets. A hot wallet allows you to access your cryptocurrency using your phone or other devices anytime.
You can use hot wallets to transfer crypto back to exchange to complete more trades or cash out your holding, and they are more secure than leaving your coins in an exchange account. Most of them are free as well.
On the other hand, hot wallets are more vulnerable to hacking because they are online.
Cold Wallets
As the name implies, a cold wallet is a physical device that keeps your cryptocurrency fully offline. They often resemble USB drives.
Your holdings can be protected from hacking and other online attacks by taking them offline, but you also risk losing them. In this form of storage, there is no backup; if your wallet is lost, you have no access to your investments. The price for cold wallets can also reach $200 (although there are certainly cheaper options available).
Hacking is much more complex with a cold wallet, but it is possible. Buy your hardware wallet directly from a manufacturer instead of secondhand, because it may have been tampered with in a way that leaves it vulnerable.
Buying and holding cryptocurrency for an extended time may be more beneficial with cold storage. In contrast, if you’re interested in buying and selling, or if you shouldn’t be entirely sold on cryptocurrencies but are thinking of cashing out your holdings after a while, a hot wallet – or even leaving it on an exchange – can make more sense.
How to use Bitcoin in real life?
Bitcoin can’t be used to buy goods and services anywhere like traditional currency. There are, however, still plenty of places where you can spend your bitcoins.
Stores
Purchasing goods and services online has become increasingly common with cryptocurrencies. In exchange for delicious meals, takeaway services are accepting digital cash from more and more customers, regardless of whether they serve pizza, fries, or vegan food.
Some merchants accept bitcoin as a means of payment instead of gift cards or cryptocurrency debit cards. Overstock, for example, and Newegg are among the larger online retailers that accept bitcoin.
Newegg offers a wide variety of products, from video games to drones. There are even pressure washers and dishwashers available on the site.
Additionally, there are ways to use bitcoin to make purchases at merchants who do not accept it. Flexa, for instance, supports several different currencies, including cryptocurrencies. Flexa’s payment network and mobile wallet SPEND enable you to pay in any supported currency, and the purchase price will be converted at the time of payment. Even though Flexa has a $750 spending limit per week, it is accepted by many major U.S. retailers.
As for traveling, Expedia offers hotel rooms, CheapAir offers flights, and Ships & Trips Travel offers cruises available for Bitcoin. Moreover, Virgin Galactic will take you to space if you have enough bitcoins to spend.