By: Robert | Edited August 24, 2021 |

bitcoin, blockchain, cryptocurrency graph

What are Bitcoins Really Used for? What’s the Hype?

The hype with Bitcoin has been surging. The media is all over it and it’s the talk on the street. People are making money and yet none of it makes any sense. The cost of a single bitcoin has recently exceeded $50,000!

How do I make money with something that isn’t actually real? Or is it… What are Bitcoins good for?

If you’re looking to have Bitcoin explained for beginners, you are not the only one. As confusing as it can get it may be something that you should give some attention to as its rise to popularity skyrockets. A common question heard is “what is the purpose of Bitcoins?”

In a nutshell, Bitcoin is a type of cryptocurrency (crypto), essentially one kind of crypto out of the many that are available. Bitcoin is the oldest crypto powered by blockchain therefore we most often hear about it.

Bitcoin, Cryptocurrency, and Blockchain are the main terms we hear when it comes to this concept. Each term is a different piece in the puzzle and to understand it fully we need to further break these down.

What is Cryptocurrency?

cryptocurrency bitcoin coins what are bitcoins

Cryptocurrency is an overarching term for blockchain-based digital currencies. Digital currencies are the concept of real money but strictly digital meaning exchanged online.

You cannot hold it, hand it to anybody, or give it away as you would regular coins and bills, it’s literally online money.

To get crypto you need to purchase a digital wallet with your real earned money and this wallet holds any cryptocurrency, or Bitcoin if that’s what you’re after.

This crypto is then exchanged on blockchain, the technology that crypto sells on. There is no bank for cryptocurrency and crypto is not backed by banks.

Different cryptocurrencies are built on their own blockchains which is why you’ll hear about Ethereum and Litecoin which are also public blockchains and get much of the attention, although there are others available.

How Does Blockchain Work?

Blockchain bitcoin grid meaning

Blockchain is a high-tech system that has been built to securely store and exchange data. This technology stores data and makes all transactions permanent by chaining together blocks of information.

Once a transaction goes through, one cannot go back and change it and there are no refunds.

Transactions with blockchain are public meaning anybody can see them happen from anywhere in the world and they are linked to a wallet, not a person. This makes the transactions anonymous as it’s only linked to a username, not a person directly.

With a digital wallet being just that, digital, it is important to not lose your wallet or the password to your wallet. Losing a wallet can be irreversible and any Bitcoins you had would still exist but would not be considered usable.

Password recovery is highly unlikely as there is no bank to walk into with identification.

With crypto being public and visible to anybody, wallet balances can be checked by anybody as the owner remains anonymous. As with any technology, there are things we consider to be positive and of course limiting.

pros vs cons of cryptocurrency chart

Is Blockchain Safe?

As crypto is not physical and can’t be held in your hand it is associated with a wallet by a username. This username keeps you anonymous which appeals to many individuals.

Blockchain technology is made safe by using hashing algorithms. What this means is that every time a new block is created in the chain it creates a new value that is not reversible and is hard to hack.

At the same time as these transactions are occurring computers around the world are updated live as transactions go through, it’s not one single database.

This differs from many of the other systems as not having one database is a lot harder to get into than having one single database at one location. These databases can still be somewhat attached but much less than a normal database.

One thing to keep in mind with crypto is that it’s not controlled by the government making it usable on the dark web (used to make anonymous transactions and communication, sometimes illegal activity).

Comparison of Banks Vs. Blockchain

Comparison chart of blockchain vs. banks

Where Can I Use Crypto?

As cryptocurrency becomes more popular its use will only increase. The gaming industry has jumped on board with Microsoft allowing its use for credits in their Xbox store since 2014.

Today it’s still not fully usable in stores but the big retailers are getting on board. So exactly what are Bitcoins good for? What is the purpose of Bitcoins? As of 2021, stores are starting to accept Bitcoins as currency.

Some of the big retailers to accept crypto are Home Depot, Starbucks, and Overstock to name a few. It’s becoming something you can use in everyday stores.

With crypto being anonymous, the black market (illegal activities) has been a big player in this industry. Through the dark web, crypto has been a good fit for these types of transactions.

Is Cryptocurrency the Next Big Thing?

Depends on who you ask.  Maybe when large financial institutions are on board will society feel better about it but for now, it’s still difficult to understand and it’s not for everybody.

If you are interested in choosing crypto as a currency make sure to do your due diligence and become as informed as you can prior to taking part in it.

Is Cryptocurrency a Good Investment?

man standing on stack of Bitcoins

At this point many still consider it a gamble. People are winning and losing on cryptocurrency as it goes up and down in value.

If you are even considering getting involved be prepared to lose what you put into it as this is a very possible scenario. You should consult a professional prior to making any decisions.

Where does Cryptocurrency Go from Here?

Bitcoin, Ethereum, and Litecoin are terms that we will hear more often as time goes on. Cryptocurrency is only gaining popularity but the learning curve can be steep.

As society becomes more knowledgeable crypto may gain more value in day-to-day operations, so deciding on whether or not you want to start considering this is up to you. Investing consists of informed decisions and as always do your research beforehand.

Having Bitcoin explained for beginners is one step to learning what Bitcoins are good for and how they work, however purchasing Bitcoin should be done with extreme caution and a full understanding of the process that goes with it. Cryptocurrency is a volatile currency and one should be prepared for the ride.

Thanks for reading! Please leave any questions or comments below.