Bitcoin (BTC) attracted a lot of people from all over the world during the last years. Through its price increase, it helped investors make tons of money. However, to understand Bitcoin’s value we also need to know what is Bitcoin used for.
This guide will be about it.
Understanding how Bitcoin works and which are the use cases behind the largest cryptocurrency in the world is key to also know what could happen in the future with it.
Disclaimer: the information shared by AltSignals and its writers should not be considered financial advice. This is for educational purposes only. We are not responsible for any investment decision you make after reading this post. Never invest more than what you are able to lose. Always contact your professional. financial advisor.
This is the main question: what is Bitcoin used for?
The answer is: it can be used for a variety of things.
Indeed, Bitcoin was created as a peer-to-peer network in which individuals could send and receive transfers without depending on a centralized authority. This is the most important use case of Bitcoin.
In the financial world, individuals depend on centralized banks and financial firms to handle their funds. The bank could block your funds and it needs to approve every single transaction you make. In many cases, when you need your money the most, the bank would not give it to you claiming they need to review the transfer.
With Bitcoin, this does not happen. Bitcoin works as a decentralized network in which individuals can freely send and receive transactions. There are no blocked accounts or transfers. Basically, you become your own bank. You decide which funds you send, how much you receive and more.
Nobody will ask you the reasons behind a transfer. You can do it freely and without any questions. This is your money, why should you explain what you are using it for?
Moreover, Bitcoin can be used to send and receive international transfers. This is certainly important in countries with capital controls. People can receive payments or send money to other countries without being worried about government intervention.
People are using Bitcoin in order to avoid inflationary currencies. Fiat currencies have been losing their value. Every year, more fiat money is needed to buy the same goods and services. This shows there is inflation, which destroys people’s savings over the long term.
Bitcoin has been the cryptocurrency that allowed people from all over the world to find a store of value. It is easier to handle than gold and it is also safer. Thus, Bitcoin became the preferred method to store value in several countries.
There is only 21 million Bitcoin. There will never be more than that. This is the main difference between Bitcoin and fiat currencies. Fiat currencies can be printed at any moment by the government. This happened for example during the COVID-19 pandemic.
Countries printed trillions of dollars in banknotes to help people face the Coronavirus crisis. This, however, is expected to have a negative impact on people through higher inflation. Bitcoin solves that problem. Not only investors can be the owners of BTC, they can also be sure that nobody can steal their money.
Bitcoin cannot be confiscated as long as you hold your private keys. They cannot be blocked or stolen. This is why Bitcoin is so important. This is why several governments do not want you to use Bitcoin. They literally lose the power they had to control your financial life. You are the real owner of your funds, no matter where you are.
Bitcoin mining is used for protecting the Bitcoin network and processing transactions. Moreover, they help expand the decentralization of the network. Bitcoin mining is the main economic activity linked to Bitcoin.
Every single time a person sends a Bitcoin transaction, it needs to be confirmed by miners. The transactions that have the highest fees will then be processed by the miners and added to the next block. Those that have lower fees remain on the waiting list to be approved.
Considering that Bitcoin blocks have 1 MB storage, they cannot be used to process a large number of transfers per second. Miners are working in order to process these transactions and validate them. Thanks to the miners, the Bitcoin network is secure and it would require the energy of an entire country to at least take control of the network.
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