Why Use bitcoin"

Last updated: 26th November 2013


Why use bitcoin?


Bitcoin is a relatively new form of currency that is just beginning to hit the mainstream, but many people still don’t understand why they should make the effort to use it. Why use bitcoin? Here are ten good reasons why it’s worth taking the time to get involved in this virtual currency.

It’s fast

When you pay a cheque from another bank into your bank, the bank will often hold that money for several days, because it can’t trust that the funds are really available. Similarly, international wire transfers can take a relatively long time.



Bitcoin transactions are generally far faster. Transactions can be instantaneous if they are “zero-confirmation” transactions, meaning that the merchant takes on the risk of accepting a transaction that hasn’t yet been confirmed by the block chain. Or, they can take around ten minutes if a merchant requires the transaction to be confirmed. That’s far faster than any inter-bank transfer.
It’s cheap
What’s that you say? Your credit card transactions are instantaneous too? Well, that’s true. But your merchant (and possibly you) pay for that privilege. Some merchants will charge a fee for debit card transactions too, as they have to pay a ‘swipe fee’ for fulfilling them. Bitcoin transaction fees are minimal, or in some cases, free.
Central governments can’t take it away

Remember what happened in Cyprus in March 2013? The Central Bank wanted to take back uninsured deposits larger than $100,000 to help recapitalize itself, causing huge unrest in the local population. It originally wanted to take a percentage of deposits below that figure, eating directly into family savings.

That can’t happen with bitcoins. Because the currency is decentralized, you own it. No central authority has control, and so a bank can’t take it away from you. For those who find their trust in the traditional banking system unravelling, that’s a big benefit.

There are no chargebacks

Once bitcoins have been sent, they’re gone. A person who has sent bitcoins cannot try to retrieve them without the recipient’s consent. This makes it difficult to commit the kind of fraud that we often see with credit cards, in which people make a purchase and then contact the credit card company to make a chargeback, effectively reversing the transaction.

People can’t steal your important information from merchants



This is a big one. Most online purchases today are made via credit cards, but in the twenties and thirties, when the first precursors to credit cards appeared, the Internet hadn’t been conceived. Credit cards were never supposed to be used online. They are insecure. Online forms require you to enter all your secret information (the credit card number, expiry date, and CSV number) into a web form. It would be more difficult to think of a less secure way to do business. This is why credit card numbers keep being stolen.

Bitcoin transactions don’t require you to give up any secret information. Instead, they use two keys: a public key, and a private one. Anyone can see the public key (which is actually your bitcoin address) but your private key is secret. When you send a bitcoin, you ‘sign’ the transaction by combining your public and private keys together, and applying a mathematical function to them. This creates a certificate that proves the transaction came from you. As long as you don’t do anything silly like publishing your private key for everyone to see, you’re safe.

It isn’t inflationary

The problem with regular fiat currency is that governments can print as much of it as they like, and they frequently do. If there are not enough US dollars to pay off the national debt, then the Federal Reserve can simply print more. If the economy is sputtering, then the government can take this new money and inject it into the economy, via a much-publicised process known as quantitative easing This causes the value of a currency to decrease. If you suddenly double the number of dollars in circulation, then that means there are two dollars where before there was only one. Someone who had been selling a chocolate bar for a dollar will have to double the price to make it worth the same as it was before, because a dollar suddenly has only half its value.

This is called inflation, and it causes the price of goods and services to increase. Inflation can be difficult to control, and can decrease people’s buying power.

Bitcoin was designed to have a maximum number of coins. Only 21 million will ever be created under the original specification. This means that after that, the number of bitcoins won’t grow, so inflation won’t be a problem. In fact, deflation – where the price of goods and services falls – is more likely in the bitcoin world.

It’s as private as you want it to be

Sometimes, we don’t want people knowing what we have purchased. Bitcoin is a relatively private currency. On the one hand, it is transparent; thanks ot the blockchain, everyone knows how much a particular bitcoin address holds in transactions. They know where those transactions came from, and where they’re sent.
On the other hand, unlike conventional bank accounts, no one knows who holds a particular bitcoin address. It’s like having a clear plastic wallet with no visible owner. Everyone can look inside it, but no one knows whose it is. However, it’s worth pointing out that people who use bitcoin unwisely (such as always using the same bitcoin address, or combining coins from multiple addresses into a single address) risk making it easier to identify them online.

You don’t need to trust anyone else

In a conventional banking system, you have to trust people to handle your money properly along the way. You have to trust the bank, for example. You might have to trust a third-party payment processor. You’ll often have to trust the merchant, too. These organizations demand important, sensitive pieces of information from you.
Because bitcoin is entirely decentralized, you need trust no one when using it. When you send a transaction, it is digitally signed, and secure. An unknown miner will verify it, and then the transaction is completed. The merchant need not even know who you are, unless you’ve arranged to tell them.

You own it

There is no other electronic cash system in which your account isn’t owned by someone else. Take PayPal, for example: if the company decides for some reason that your account has been misused, it has the power to freeze all of the assets held in the account, without consulting you. It is then up to you to jump through whatever hoops necessary to get it cleared so that you can access your funds. With bitcoin, you own the private key and the corresponding public key that makes up a bitcoin address. No one can take that away from you (unless you lose it yourself, or host it with a web-based wallet service that loses it for you).

You can ‘mine’ bitcoins yourself

In spite of the amazing advances in home office colour printing technology, most national governments take a fairly dim view of you producing your own money. With bitcoin, however, it is encouraged. You can certainly buy bitcoins on the open market, but you can also mine your own if you have enough computing power. After covering your initial investment in equipment and electricity, mining bitcoins is simply a case of leaving the machine switched on, and the software running. And who wouldn’t like their computer to earn them money while they sleep?

http://www.coindesk.com/information/why-use-bitcoin/

Yea, you can mine them, but will the returns actually outweigh the added cost of electricity (which you can't pay with bitcoins)? One of the biggest issues is this whole technology seems to be tailor made for fraud and various criminal activities. Plus I still want to know exactly what this algorithm is working on ... I just smell a rat.

The way I see it is you don't get something from nothing, so they are using your computing power for something ... the question is what and why are they not up front with what that something is?

I have seen a few things out there that say  " Get Bitcoins WITHOUT mining".   I haven't looked into any of those articles yet but when I run across something like that again, I will check it out.

Bitcoin has taken a very lump dumping in value the last time I looked. Still its worth a lot more than it originally was!

Yeah maybe because I just simply do not know enough about them.. But they scare the CRAP outta me.. and that is without me looking into it really.. Normally I tend to trust my gut because it has a winning track record...

Kevind53 wrote:Yea, you can mine them, but will the returns actually outweigh the added cost of electricity (which you can't pay with bitcoins)? One of the biggest issues is this whole technology seems to be tailor made for fraud and various criminal activities. Plus I still want to know exactly what this algorithm is working on ... I just smell a rat.

its very easy to figure out if you will be profitable mining bitcoins. you know what your electricity costs you per kilowat hour. YOu know how much electricity your mining rig uses. You also know how fast your mining rig hashes. you can plug those into one of many online calculators to figure out if you will lose money or make money mining bitcoins. i dont have any special computer or big graphics card was just curious how my $400 dell would fair. i was going to lose $15 a month on electricity usage.

also as for the foruumla bitcoin is based on its open source you can view it on the internet for yourself. thats not to say you will understand it as that is over my head but there's nothing being hidden from you the whole system is open source for any one to view. smarter people than you and i have examined the code and forumlua and found it to be good, secure, efficient, etc.

as for it being ripe for fraud. again you would need to explain how or why its ripe for fraud. debit cards are ripe for fraud look waht happenend to target. scottrade accounts get hacked, just go on the blakc market and you can buy hacked paypal accounts, hacked hulu accounts, etc. anything you do can be hacked and stolen. i think bitcoin is actually more secure than paypal and more traditional banking methods

Ponee wrote:That whole "mining" thing is just mind boggling to me....

yeah ive played around with mining, i knew my machine wasn't good enough to mine with but was just curious how the whole process works. its way over my head. honestly unless your a computer wiz your probably not gonna get anywhere mining. people spend 10s of thousands of dollars building their own cusom machines, some larger companies have liquid cooled machines which cost millions of dollars, no way you and i can compete with our bestbuy laptops

Kevind53 wrote:The way I see it is you don't get something from nothing, so they are using your computing power for something ... the question is what and why are they not up front with what that something is?

bitcoin is open source, its there for everyone to see, there's nothing secret or hidden, nobody isn't being upfront. bitcoin isn't an organization its a program and a currency there's really nobody behind the curtains to even be scamming you if thats what your saying. 

mining gold or other metals requires machines to dig, thosre machines require gas. thats the expense of traditional mining. bitcoin mining works with computers, computers require electriity, that's the expenditure to mine bitcoins.

i know many people compare bitcoins to gold or silver or diamons. yeah i agree those things have an artificual value because we place value on them. that said they do have some practical value in manufacturing, making electronics, drill bits are made from diamond, etc where as bitcoin isn't tangible so has no real value aside from what people asign to it. 

nobody is not upfront with you, just because someoen hasn't held your hand and explained to you step by step how things work doesn't mean its a scam,  you have to do your own research. ive spent a lot of time learning about bitcoin and im still a complete newbie and dont understand many of the more techiincal aspects of it

Ponee wrote:I have seen a few things out there that say  " Get Bitcoins WITHOUT mining".   I haven't looked into any of those articles yet but when I run across something like that again, I will check it out.

you can't get bitcoins without mining. well i mean you can accept bitcions for services you provide or for an item your selling and get them but nobody is just handing out free bitcoins. there are some sites that allow you to earn bitcoins by watching videos and doing surveys its miniscule amounts and many are scams though. you do cles aread alot of articles about homeless guys who sit at internet cafes and watch videos or do things all day long to earn coins. in an 8 hours day they are probably earning a few dollars

alleyrose wrote:Bitcoin has taken a very lump dumping in value the last time I looked. Still its worth a lot more than it originally was!

bitcoin took a dump a few weeks back when china proibited banks from taking part in bitcoin or dealing with companies who did. bitcoin has recovered though, i think its down a bit today but it broke $1,000 again, a few weeks ago i think it dipped below $500. its pretty high now though

Daox13 wrote:Yeah maybe because I just simply do not know enough about them.. But they scare the CRAP outta me.. and that is without me looking into it really.. Normally I tend to trust my gut because it has a winning track record...

people who don't take the time to learn about bitcoin, research bitcoin and understand them before buying shouldn't buy them. 

whats' frustrating is when people who don't understand them knock them. i heard some guy on another forum the other day knocking bitcoins saying they aren't secure, pointing out these problems with them, and then he asks where he can buy the physical coins. there are not physical coins. this guy doesn't understand the most basic element of bitcoin not being a physical currency yet he's qualified to point out flaws in the very complicated system. people like this shouldn't knock it if they dont even understand what it is

Wow how do you mine for Bitcoin? I mean is it worth it? Like is the value going to increase much more than $1000 because that is pretty expensive to pay for one bit of fresh air. 

I really know nothing about them so shouldn't be passing comment at all!

You have to leave your computer running, cranking out some algorithm designed by someone (who?) ostensibly to "mine" for bitcoins. It's real purpose? Who knows, but considering 25 are created an hour world wide, IMO it would not even pay for the electricity to run the computer.

So where does the $1000 per bitcoin come from if you can just mine your own?

alleyrose wrote:Wow how do you mine for Bitcoin? I mean is it worth it? Like is the value going to increase much more than $1000 because that is pretty expensive to pay for one bit of fresh air. 

I really know nothing about them so shouldn't be passing comment at all!

Basically "miners" use computers with souped up graphics cards, often computers built specifically for mining to in simple terms solve math problems with confirm "blockchains" and transactions and verify transactions that are occuring via Bitcoins. for doing so they unlock or earn bitcoins. thats a pretty rudimentary explaination but thats it.

Its kinda funny as I was typing this explianation you brought up a question I was curious about and didn't even realize? Ther'es only so many bitcoins that can exist right? Yes. SO once they are all found what incentive is there for people to continue mining if they don't earn coins?

I did some research and here's what I found...

The same amount.  Transactions are confirmed BY ADDING BLOCKS TO THE BLOCKCHAIN.  That's the same process that mines bitcoins.  So, if you want transactions confirmed, you have to "mine" blocks by adding them to the blockchain.  

That process can also never stop, or transactions will stop being confirmed.

However, there are built-in "rewards" for continuing to mine, even when you no longer get paid any BTC for mining them.  The miner that finds a block and adds it to the blockchain gets the transaction fees for the transactions initially confirmed with that block.  In theory as Bitcoin becomes more popular, there should be more transactions, and therefore more transaction fees for the miners.

If the transaction fees are insufficient to attract miners, then miners will drop out.  As miners drop out, the difficulty of finding new blocks will decrease, making it easier to find blocks, allowing miners who ARE mining to find blocks faster and therefore earn a larger number of transaction fees.

It's actually quite elegant.

Common sense would dictate that as more coins get mined over time and the equation grows in complexity that fewer and fewer block chains or coins will be found. I wonder is the it might not become a virtual impossibility in time?

It sounds like a game I used to play on Facebook but I can't remember it's name? Thanks for taking the time LITL69 to explain that too!

Kevind53 wrote:Common sense would dictate that as more coins get mined  over time and the equation grows in complexity that fewer and fewer block chains or coins will be found. I wonder is the it might not become a virtual impossibility in time?

This is true, this is also what keeps Bitcoins secure. The stuff is complicated to begin with but gets even more complicated. It would basically take more effort to try to defraud the system or create fake blockchains than it would just to mine bitcoins legit.

alleyrose wrote:So where does the $1000 per bitcoin come from if you can just mine your own?

the $1,000 is basically teh price. just like gold and silver has a "spot" price so does btc. I guess based on supply and demand basically. bitcoins were worth $1,000 the other day, today they are worth a few hundred less, could be worth $500 next week. It costs money to mine bitcoin so if it costs $1200 to mine a bitcoin its not worthh it at current prices. ive heard most people have to join mining pools these days to have any success. you mine as a team and split the profits basically

I stick with my instincts, and they say there is something rotten in the whole bitcoin thing ... I don't know what, but something just feels "off."

bitcoin has elemnts which make it good for illicit transaction but anybody who makes a big deal about those doesn't really know much about bitcoin except the media hype. some lady in australias sonn died from a coke overdose. rather than be mad at silkroad, or the seller who sold it to him, or his son who chose to order $900 worth of coke and overdose, she's on a crusade to end bitcoin. physical currency is the biggest means of buying illegal drugs. does she also want to ban the australian dollar?

http://www.gizmodo.com.au/2014/01/aussie-mum-in-anti-bitcoin-crusade-after-sons-death/

I hadn't heard that one LITL69? Thanks for bringing your knowledge about the bitcoin here!

judywhite wrote:It's really up to you how you will believe in this kind of technology. After all, we have different views about bitcoin. You don't have to be a libertarian, an anarchist, a conservative, or anything else, to appreciate Bitcoin. Often times we see bitcoins as a currency for illicit transactions but we didn’t known that there are ways where we can use it for entertainment and others like in here: http://bitcoindaily.com/leisure/

Actually I didn't say anything about illicit transactions although I am aware that it is a common usage for them. I imagine dealers love them, noting to transport, hard to track, easy to move across borders, just a few keystrokes and voila! My reservations are more of a something is rotten in Denmark kind of thing ... I am not sure what ... yet, but something is not as it seems. Sooner or later the truth will come out I think, and a lot of people are going to get burned, bad.