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5 things you should know about Bitcoins

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The penetration of MMM into Nigeria and the opposition it met from some authorities and banks has given rise to several ways to cut the banks out of it transactions. It has given rise to the use of Bitcoins.

However the question on the lips of many people is what exactly is Bitcoins? Many people are also curious as to how it works and if it is safe. Here are a few things to know about the currency.

1. Bitcoin is a type of cryptocurrency. It was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Bitcoin transactions are made with no middle men – meaning, no banks, says CNNmoney. There are no transaction fees and no need to give your real name. Cryptocurrencies or Digital currencies are internet based form of currency or medium of exchange – distinct from physical, such as banknotes and coins – that exhibits properties similar to physical currencies, however, allows for instantaneous transactions and borderless transfer-of-ownership.

2. All transactions in the currency are recorded permanently on a distributed ledger called the “blockchain” – this ledger is shared between all full Bitcoin “miners” and “nodes” around the world, and is publicly-viewable. These miners and nodes verify transactions and keep the network secure. For the electricity they use to do this, miners are rewarded with new bitcoins with each 10-minute block (the reward is currently 12.5 BTC per block).

3. The Bitcoin protocol is also hard-limited to 21 million bitcoins, meaning that no more than that can ever be created. This means that no central bank, individual or government can come along and simply ‘print’ more bitcoins when it suits them. In this sense Bitcoin is a deflationary currency, and as such is likely to grow in value based on this property alone.

4. Bitcoin is legal in many jurisdictions in the world. Many countries, such as Ecuador have also banned its use. While there are many bitcoin traders and promoters in Nigeria, the stance of Nigeria’s apex bank, Central Bank Of Nigeria is not clear about the use.

5. Like everything, Bitcoin’s price is determined by the laws of supply and demand. Because the supply is limited to 21 million bitcoins, as more people use the currency, the greater demand, combined with the fixed supply, will force the price to go up. Because the number of people using Bitcoin in the world is still relatively small, the price of Bitcoin in terms of traditional currency can fluctuate significantly on a daily basis, but will continue to increase as more people start to use it. For example, in early 2011 one Bitcoin was worth less than one USD, but in 2015 one Bitcoin was worth hundreds of USD. In the future, if the currency becomes truly popular, each single one will have to be worth at least hundreds of thousands of dollars in order to accommodate this additional demand. Currently one bitcoin is worth over N220,000.

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