What is Bitcoin?
A lot of people myself included have heard about bitcoin in the past but hardly know what exactly it is and how to use it to make money. Bitcoin in layman’s terms is simply “digital money” which means it cannot be seen, touched, smelled or felt but it can be used to purchase things online just like you do with your internet banking enabled ATM cards such as Mastercard, Visacard, etc. It can also be used offline is some shops which have it enabled as a means of payment although I don’t think we have any such shops in Nigeria.
Bitcoin is used mainly by some people, companies and websites in the more developed parts of the world such as Europe and North America, we Africans have not really got the hang of it yet. Companies such as Namecheap, WordPress and Reddit have adopted it and a lot of top tech guys feel it is the future of internet payments. Stats from Bitcoincharts.com show that at the end of 2013, over 1.5 billion US dollars worth of bitcoin were in circulation worldwide.
Who created Bitcoin?
According to Bitcoin.org, the first idea for a currency like bitcoin was proposed by Wei Dai in 1998 with the concept called “cryptocurrency” which literally means “secret currency” but can be interpreted as “secure currency” and it was so named because it uses cryptography for its creation and controlling financial transactions. Bitcoin’s first specifications and proof of concept were published by Satoshi Nakamoto in 2009 and as such many regard him as the creator of Bitcoin.
Who owns Bitcoin?
Well this is a tricky one, nobody owns Bitcoin. Bitcoin is an open source platform with no central authority, the Bitcoin software and protocol can be edited by any developer (programmer) in the world but the edit must be reviewed and accepted by many other developers before it is accepted.
Now you might wonder who controls the Bitcoin platform; it is controlled by all Bitcoin users in the world who all have to use Bitcoin software which adhere to the defined protocols of Bitcoin.
How does it work?
To begin, you need to download and install a Bitcoin mobile or computer app which will provide you with a Bitcoin Wallet similar to Google Wallet, etc and that wallet allows you send and receive bitcoins.
Is it secure?
Yes it is pretty air tight due to very high security measures and very recent technology but that is not to say it cannot be hacked, I doubt if anything digital can’t be.
How do you make money through Bitcoin?
There are two ways you can do this:
- Through speculative buying and selling: Bitcoin is a universal currency which means anybody in the world can (they may choose not to) buy or sell it. Bitcoin’s value as at 7th April 2016 was 1 Bitcoin equal to 421.64 US Dollars which is 83,000 Naira at the official CBN dollar to Naira rate of 197 Naira or 135,000 naira at the current parallel market rate of 320 Naira to a dollar.
Just like people trade forex by speculating that some currencies will rise, you can also speculate with Bitcoin because the value increases or decreases with certain trends and events. For example, people who bought bitcoins when it was just invented in 2009 bought 1 bitcoin for just 6 dollars, its value rose to a peak of about 1100 dollars in 2014 then took a nose-dive to less than 300 dollars in 2015 and started rising again as seen in the graph above.
- By mining for Bitcoins: This is a process where you use your computer and special Bitcoin mining hardware and software to compete with several other miners to solve some very complex mathematical problems which are used to serve as protection for Bitcoin transactions. If you get lucky and your hardware cracks a problem, you will be rewarded with some bitcoins usually about 25 bitcoins per calculation, you can also form or join groups of people to mine in a pool and then share the bounty according to each team member’s contribution.
Should you deal in Bitcoin?
Well, I will speak for myself, I believe Bitcoin is still in its early stages and you need a great deal of understanding of how it works before you invest in it except you have lots of cash you don’t mind losing but that doesn’t mean you should write it off completely, there are people making big bucks through it. I know that there are some Nigerians dealing in Bitcoin, you guys should tell us your success and/or failure stories.
You can learn more about Bitcoin at www.bitcoin.org