The world of cryptocurrencies is at a very interesting juncture today. With economic volatility and geopolitical tensions plaguing the world, it is little wonder that traders and investors are moving towards such decentralized currency, hedging their portfolio against the impact of such market volatility. And the digital currency that has gained the most due to this is Bitcoin.
According to the monthly Bank of America Merrill Lynch Fund Managers’ survey, one of the most followed and respected on Wall Street, Bitcoin is now considered the “most crowded trade, with too many investors on one side of the trade and it could be due for a reversal,” according to an article on CNBC, published in September 2017.
However, if you have been following the news, Bitcoin has not only proved this survey wrong, it has gone on to gain in value by over 1,500% since January 1, 2017. At the same time, this isn’t currency that you can physically use, existing only in the virtual world. This is why many are still wary of moving away from traditional currency.
So, What Can You Do with Bitcoins?
Bitcoins can be used to buy goods and services from vendors who accept this digital currency, with Expedia and Dell being prominent names. They can be used to buy gift cards as well from Amazon and Sears. Some generous souls have given it to their friends and family members, while some have even donated it to charities.
But how are they sending this digital currency to others. Let me help you understand.
This electronic money will need a Bitcoin address, which is a randomly generated long string of alphanumeric characters. The Bitcoin address can be accessed by a private digital key, which is again a long string of characters that will only be kept by you. This will keep your digital currency safe from being stolen.
If you are thinking that you need to remember all those Bitcoin addresses, or keep a list handy somewhere, you don’t. A Bitcoin wallet will do that for you, by keeping track of all your Bitcoin addresses. When you’ll send Bitcoin to someone, you need to inform the rest of the Bitcoin network about it, for them to agree to your transaction.
A Bitcoin wallet can be downloaded for free. Not only will it handle the Bitcoin addresses for you, it will also allow you to make payments in Bitcoins to others.
To send Bitcoins, you can either cut and paste a Bitcoin address or scan the address with a Bitcoin wallet running on a smartphone camera, when displayed as a QR code.
Bitcoin wallets can be of many different types, such as:
- For Desktop Computers: These wallets can run only on desktop computers, like your Mac or PC. The Bitcoins addresses and the private keys are stored and accessed on the hard drive.
- For Smartphones: To stay connected to your wallet and make transactions on the go, you can download the smartphone version. After this, all you need to do is scan the QR code displayed on the counter to pay for your coffee and click on “Send.”
- Online Wallets: Online wallets run on the Internet and your wallet, with all the Bitcoin addresses and private keys, are stored there.
Out of all the three wallets, it is the online wallet that has the most advantage, since it is not affected by the crashing of a hard drive or a stolen smartphone. However, the risk of hacking still persists, if set up incorrectly.