Current understanding and use of Bitcoin as a currency is not straightforward. More importantly, despite little awareness regarding Bitcoin in the public, the currency has registered exponential growth within half a decade. Its progressive development and potential advantages as a global currency has outdone any other national currency in history. This explains why in conventional use, Bitcoin is a virtue goldmine. Bitcoins present an extremely rewarding, profitable, and reliable investment, both in terms of income generation and in reducing operational expenditure.
This article acknowledges that the technical details of Bitcoin technology may be irrelevant from the perspective of investors and or businesspersons. The brief discussion excludes the focus on the crypto-currency model, the cryptography mathematical model, the use of block-chain technologies, which may not be as important as the realization of the potential benefits of a Bitcoin wallet. As such, the article seeks to exclusively review the realistic user-based advantages of using Bitcoin as a currency. Before listing the potential advantages, however, it is important to provide a succinct history of the currency.
Above the technical profile, the question of how one may benefit from using the Bitcoin currency remains. In other words, why should you invest in the Bitcoin currency? Here are four reasons that define Bitcoin as a currency of tomorrow, and its relevance in a globalized future:
1. Absence of a Central Authority and Jurisdictional Regulation
Transactions in Bitcoin are based on a consensus network where peers send and receive a purely digital currency. There is not a nation, agency, or individual who owns and controls the Bitcoin currency. This means that unlike contemporary national currencies, Bitcoin is a payment system empowered and defined by its users, and thus it lacks a central authority in charge of its circulation. Further, Bitcoin transactions do not require or facilitate intermediaries/middlemen, such as banks, in the contemporary financial world.
The absence of any central authority thus gives total and absolute control to Bitcoin users globally, regardless of their jurisdiction or residence and qualifies the currency with unlimited exchange freedom. Bitcoin transactions are feasible any time, from anywhere, between anybody, and without rules and regulations that are common with modern bureaucracy. This defines the infinite potential for an investor or a businessperson for never having to observe the day or time (where weekends of during night time) of transaction, as well as peer location or personal identity of peers you transact with. In the words of Satoshi Nakamoto, Bitcoins can be “transported over a communications channel” to a global user.
2. Capitalization on an Anonymous Virtual Identity
To begin with, Bitcoin omits and does not require personal information or identity in any transaction. Transactions do not rely on the names of sellers and or buyers, and they do not even record personal addresses. Each user has a unique Wallet ID, which constitutes their virtual identity. Furthermore, Bitcoin eliminates any risks when transacting with merchants or customers.
Bitcoin transactions come with a high level of security because they are:
- Secure from charge-backs and fraudulent losses
- Accounted for and recorded in a public log based on unique user’s Wallet ID
- Based on user agreements, making PCI compliance for all transactions irrelevant
Governments and organizations have risen up, severely opposing this benefit of a Bitcoin currency, arguing against potential abuse. Assorted interests have pointed out the likelihood of Bitcoin usage in drug trafficking and illicit commerce. In the meantime, businesses are protected and galvanized regardless of the limited personal identity required.
3. Acquisition Integrity and Usage Mechanisms
Receiving and sending Bitcoins from and to peers (Bitcoin users) is not only reliable and secure as noted above, but acquiring a Bitcoin wallet is also as reliably systemized action.
Bitcoin can be acquired in four distinctive ways, namely:
- Competitive mining using Bitcoin mining hardware, where cryptography is systemized using advanced block-chain technologies
- Payment from another user for agreed goods/services
- Purchased with national currencies at Bitcoin exchanges
- Peer exchange using send/receive payment arrangements
Given that the Bitcoin network is peer-to-peer, every one of these transactions are recorded and accessibly open for review in a public ledger, known as the block chain. Therefore, the transactions can always be checked and validated in real time, as authentic transactions with highly protected digital signatures, by specialized mining hardware.
4. Globalization and Tax Exemptions
Given that Bitcoin is a digital currency that has no legal tender status ascribed to any nation or any jurisdiction, all transactions are above tax liability. In what is emerging as a form of modernized finance, Bitcoin is still a goldmine. No government in the world currently taxes any capital gain, income, or payroll limits recorded on Bitcoin. The practicality of that single fact, not only consolidates Bitcoin as a global currency, but also offers infinite potential for investors and businesspersons to benefit from the no-tax transactions.
Featured photo credit: Antana via flickr.com