Don’t you think international transactions would be more convenient if there were no “currency conversions”? Well, this problem was actually solved in the year 2008, when a group of bright-minded people invented the cryptocurrency bitcoin (BTC). Thus, if you own a bitcoin wallet, you’ve already made life easy for yourself.
In fact, I’m sorry if you haven’t invested in bitcoin yet because those who did it in the early days have made bigger profits. However, it is not too late for you because its value is still increasing.
So, what is the fuss all about? Let’s understand the concept of bitcoin and how investing in cryptocurrency can actually benefit you.
What is a Bitcoin Wallet?
Bitcoin is one of the most popular cryptocurrencies in the world. In fact, you may say that the concept of investing in cryptocurrencies started from here.
Now, a cryptocurrency is a lot different from a fiat currency. You cannot use them through banks or even the regular e-wallets like PayPal or Paytm. You need to have a separate bitcoin account, or what you call the bitcoin wallet.
This wallet is available as a software, app as well as a hardware. They have double encryption and store all your bitcoins, credentials and transaction information.
In the section below, you’ll understand better how this really works.
How Does it Work?
Before you understand how the bitcoin wallet works, you need to understand the concept of cryptocurrency. For this, we’ll break the word into 2 halves – “crypto” and “currency”. The word “crypto” comes from encryption. Thus, a cryptocurrency is a currency that has been encrypted.
There is no physical form of bitcoin. It is completely virtual in nature and has 2 layers of encryption on it. Here’s how bitcoin exchange takes place between two parties:
Unlike fiat currency, there are a fixed number of bitcoins that keeps circulating between people. That number is 21 million. Yes, in a population of 7.8 billion, there are only 21 million bitcoins in circulation.
Now here, 1 bitcoin is way to expensive. As of September 2020, if you convert BTC to USD, the bitcoin price is $10,458.80. So, the plus point here is that when you trade in bitcoin, it is in decimals. It means that if you want to pay $4,000 in bitcoin, you can pay ₿0.38. or, even if you have to pay $20 in BTC, you can pay ₿0.0019.
They payee or receiver will give you his wallet address on which you need to pay.
The Double Encryption
Every bitcoin account has got two keys – a public key and a private key. These keys are hash functions or unique codes that encrypt your wallet as well as transactions for your privacy and security. When you create your account, these keys are generated on their own.
Now, the beauty of the hash function is that the combination of strings and numbers that it can have are infinite. Yet, every combination will produce only one value. Here’s an example:
Suppose, your input value is x035nuuyr55ns9wmrfo095n28sh6bl25.
The corresponding output value comes out to be, say dc9466.
Now, if any one character in the input value changes, the output value will change too. Hence, an error is detected. The input value here is the public key.
The private key is a second layer of encryption which you use only to sign in to your bitcoin account. You’re not supposed to share it with anyone. This is what makes your account completely secure.
Since there are only 21 million bitcoins in circulation, you need to ensure that there is no extra bitcoin in circulation. For this, the inventors of bitcoin invented a technology called blockchain, that is now being used in other departments too.
Basically, there is a public ledger in the blockchain where every bitcoin transaction is recorded. You have actual people called “miners” who look into every real-time transaction of bitcoin taking place all over the world.
The miners look into the transactions and help form the “chain” in the blockchain. This chain has individual “blocks”, each block having one transaction. They can see the public key of the parties between which the bitcoin exchange has taken place.
Today, you have companies that are dedicated to this job like bitminer and bitmain that use software and technology for efficient bitcoin mining. Bitmain has in fact introduced the antminer s9, a machine that can is designed for mining and operates with artificial intelligence.
How Can You Benefit with a Bitcoin Wallet?
You can see that even though the process works in a complicated way, it is really safe. As far as you’re not careless with your private key, NO ONE can steal your bitcoin money. Here are 5 reasons why having a bitcoin wallet is beneficial:
Easy to Earn or Buy Bitcoin – Anyone Can Have a Bitcoin Wallet
There’s no restriction on having a bitcoin wallet. You can belong to any country and be of any age or profession. Of course, I wouldn’t recommend kids to use something so complicated. You can buy bitcoin with credit card, debit card or bank transfer from various online platforms.
If you don’t wish to invest in it with your existing money, you can even earn bitcoin by providing services on certain platforms. If your employer has a bitcoin wallet, you can ask him to pay your salary from there too.
International Transactions Made Simpler – No Currency Differences
Now, say for example that you hire a virtual assistant to get a job done. This person belongs to another country. You could be comfortable paying in one currency and the other could be comfortable receiving another one. However, if you both have bitcoin, the problem is solved right there! Moreover, there’s barely any transaction fee, as compared to the difference between 2 fiat currencies.
Trading with Bitcoin on Various Financial Instrument Platforms
One of the greatest benefits of cryptocurrencies is that you can use them like money to buy goods and services or as a financial instrument to trade in. There are many platforms like bitcoin trader, where you exclusively trade in cryptocurrencies only.
There are other platforms like Plus500, where you can trade in cryptocurrencies along with other financial instruments too.
Security – It is IMPOSSIBLE to Steal Your Money, Misuse It or Hack a Bitcoin Wallet
As far as you keep your private key safe and secure, NO ONE has access to your wallet. At the same time, you need to remember your private key, or rather have it noted down somewhere in order to log in. if you forget it or lose it, there’s no way you can open your own bitcoin account!
This is why many people prefer physical paper wallets that have these keys printed in the form of QR codes. Or, you can use a proper hardware wallet like the Ledger Nano X or Trezor, an easy-to-use hardware wallet. You can carry it around in your pocket and sign in using it.
It stores your private key for you and uses a very secure chip for doing so.
Value of Bitcoin in the Market – You’re Rich if You’ve Invested Your Money Here
From 2008 to 2020, bitcoin has had a long journey of growth. Back in 2010, the price of 1 BTC was $0.03 only. If you invested back then, can you imagine the bitcoin profit you’ve made, given that the present-day value is $10,458.80?
This is the evolution bitcoin has been through – its value against fiat currencies has been increasing continuously. Today, if you want to buy bitcoin, you cannot buy an entire 1 BTC. It will be too expensive for you, unless you’re rich enough. The value will mostly be a decimal figure less than 1.
What is Your Final Call on Having a Bitcoin Wallet?
If you know people in business around you using bitcoin, do not miss the opportunity and start using it. Even if you don’t have anyone to pay you or accept bitcoin, it’s OK. You can invest in it like any other financial instrument and profit years later by selling it off.
Using a hardware bitcoin wallet may be convenient than noting down a 51-character long private key somewhere. They’re very safe to use too. The cryptocurrency is still growing, so it’s not too late to invest in it. What do you say, want to give it a shot?