The payment system has changed entirely over the years, and now bitcoin and other cryptocurrencies are becoming a major part of the picture. To cope with the changes taking place in the payment system, several Bigger investment banks and financial services holding companies like JPMorgan, Chase is moving towards creating this new payment system.
Before moving any further, let us know what bitcoin is and how it works.
What is Bitcoin?
Bitcoin is a cryptocurrency invented in 2008 and brought to action in 2009. It is a decentralized digital currency without a central bank, and it can easily be sent from user to user in exchange for other currencies, products, and services. It typically does not exist in physical form like paper money.
According to research done by the University of Cambridge, in 2017, there were around 2.9 to 5.8 million users using cryptocurrency wallets, and most of them were using bitcoin.
Get to know every detail of bitcoin.
How bitcoin works
Source: SmartBettingGuide.com
Do not get trapped by seeing a shiny image of coins in the symbol. Though it can be used as fiat currencies, bitcoin is just a kind of software. In simple words, we can say that it is like an online version of cash that is used to buy products and services, but not many shops accept Bitcoin till now, and even some countries have banned it.
Each Bitcoin is a computer file that one can store in a 'digital wallet' app on a smartphone or computer. Further, you can send bitcoins or a part of one to your digital wallet or other people.
Like any ATM transaction, bitcoin transactions are recorded in a public list called the blockchain. This helps in tracing the history of bitcoins so that people do not spend coins they do not own.
All you need to know about blockchain
Blockchain is a specific type of database that stores data in blocks that are chained together. All the new data which comes in is entered into a fresh block, and when the block is filled with data, it is chained onto the previous block. Blockchain mainly stores the data of all the bitcoins transactions made.
Get to know details about the storage structure and more of blockchain.
Source: Inlea
Ways people can get Bitcoin:
Three main ways people can create bitcoins are:
- One can buy bitcoins using 'real' money.
- People can pay you with Bitcoins in exchange for selling things.
- Or, you can use a computer to create it.
Bitcoins are slowly taking over the payment system as well as the banking system. And the reason is quite simple: it is not controlled by the government or banks, and people can spend it anonymously. Although all transactions are recorded, nobody will get to know your account number unless you tell them.
Must-Read: The Future Of Banking: Is It All Bitcoin And Blockchain?
How Bitcoins Affects Payments System And The Banking System
Cryptocurrencies are becoming a safe and secure way to protect one’s wealth for many wealth holders. When bitcoins were introduced, it was looked upon as an investment, but now things are changing at a faster pace, and it is becoming a tool for payments. And if it will keep accelerating at the same speed, it will soon become the world’s medium of exchange.
Source: Reddit
Noticing the major changes in the payment system, some banks are moving into this area. J.P.Morgan, Chase & Co, the leader of the large commercial banks at this time is also making in this area. And J.P. Morgan has become the first U.S. bank to create and successfully test a digital coin representing a fiat currency. PayPal has also announced that soon the users can buy, hold, and sell crypto directly from their accounts. Not only that, Venmo, Square, Inc., and many others are also ready to accept bitcoin.
Why are investors attracted to buy bitcoins?
The concept of using bitcoins for payments is new, and many stores and countries have not accepted it yet, but it has become the star of 2020. Wondering how? Well, since the start of the year it has multiplied its value four times over in 2020. And, if the cryptocurrencies once become established and safe, it will be standing as a rival to gold and could trade as high as $146,000. Get to know some major factors due to which investors are now more interested in buying bitcoins.
Advantages and disadvantages of cryptocurrencies
There are various advantages that cryptocurrency users get. To mention a few:
- cryptocurrencies allow their users more autonomy over their own money than fiat currencies do.
- There is no intermediary authority like a bank or government involved enquiring about how you spend your money.
- Also, like with many online payment systems, bitcoin users can pay for their coins anywhere they have Internet access.
- These coins are safe to use as it cannot be faked, copied, or spent twice.
Get to know more advantages and disadvantages of cryptocurrencies.
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