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What is bitcoin: Features, Benefits, How to Buy Bitcoin?

By PolicyBazaar
  | Published: 26 February 2021

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Bitcoin- a term we have all come across time and time again but most of us do not fully understand it or what it entails. This new form of currency has revolutionized the way the money market and the world works. While we have all heard about some getting massive gains out of trading in Bitcoins before, it has piqued our curiosity to know more about this virtual currency.

Due to the distinctive nature of digital or virtual currencies, they come with certain inherent advantages over making transactions made in conventional currencies. Even though Bitcoin made its entry into the investment scenario over a decade ago, the digital currency landscape has never been the same since its entry. The world of virtual currencies is constantly evolving but the majority of the tokens still remain untested as a channel of exchange. As a consequence, buyers must be careful in evaluating the risks and benefits associated with this game-changer.

Having said that, bitcoin accompanies a wide variety of advantages to cater to the needs of its users as opposed to any other medium of making payments. We’ll go into the details of this as we explore the world of bitcoins in this article further. Having a better understanding of how bitcoins work by understanding their design, it will make it easier for us to see its advantages for making payments in a better light. 

What is Bitcoin?

This is a cryptocurrency that is decentralized. It is one of the peer-to-peer cryptocurrencies that are designed to enable online investors to make transactions using digital units of exchange known as bitcoins or BTC. Introduced in 2009, these cryptocurrency units have been shrouded in anonymity with their invention credited to a mysterious entity called Satoshi Nakamoto. They have established their network across the world and have come to dominate as well as define the space of cryptocurrencies. Inspired by its unbridled success, there has been a sprout in its legion of followers. There has also been significant growth in many other alternatives to the pure commodity currency like silver and gold coins or the government’s fiat currency, namely the UAE Dirham in the United Arab Emirates. 

What prompted this need for an alternative currency when there are other traditional ways of conducting transactions? One of the key defining features of Bitcoin is that it is decentralized which means that it is unregulated by any central authority, thus distinguishing it from any fiat currency. The payments made through bitcoins are processed via a private computer network linked by a shared ledger. Each transaction made using these are recorded in a “blockchain” on every computer that is used to update and inform other accounts. The blockchain thus serves as a distributed ledger thus eliminating the need for a central authority to control and maintain records of such transactions.

This digital currency is not issued by the government or the central bank of a country like in the case of fiat money. Instead, bitcoins are produced by a computer by a process that involves solving complex mathematical algorithms that help verify a transaction block. These transactions are then added to the blockchain. These can also be purchased with the standard currency of a nation and then placed into one’s “bitcoin wallet.” This wallet can be easily accessed through the user’s smartphone or computer.

Features of Bitcoin:

Created after the economic depression of 2008 and the crash of the housing market in the United States of America, Bitcoin is a digital currency that enables payments purely in electronic form. Unlike a note or coin, it is not tangible and payments made using this virtual currency are accounted for and transferred using computers. Let us look at some of its other features below-

1. It is the most widely used form of digital money in the world.

2. There are no physical bitcoins.

3. It can be exchanged using credit cards, smartphones as well as via online cryptocurrency exchanges.

4. It can be transferred into physical cash.

5. Bitcoin tends to work according to the rules published in a whitepaper by the mysterious entity ‘Satoshi Nakamoto.’

6. It promises lower transaction charges compared to traditional payment methods online and is operated by no centralized authority.

7. The balances are kept on a public ledger to which everyone gets transparent access. Therefore, all people trading in bitcoins know each other’s transactions by looking at the public records. The transactions are however protected by a special number assigned to them.

8. Each bitcoin transaction is verified by a computer.

9. Individual bitcoins are not valuable like in the case of commodities.

10. The popularity of Bitcoins has impelled the launch of several other virtual currencies collectively named ‘altcoins.’

Benefits of Bitcoin:

Now that we have gathered a brief information on bitcoins, let us now dwell into how this cryptocurrency offers potential benefits to its buyers-

Users have autonomy:

This aspect of cryptocurrencies is perhaps one of the main tenets behind their huge popularity. Digital currencies tend to trump fiat currencies because they theoretically offer more autonomy to its user. Users have complete control over their decision to spend without any intrusion from an intermediary authority like the government or the central bank of the country.

They offer discretion:

The transactions made using bitcoins are discrete. Until the user himself publishes his transactions voluntarily, his purchases remain disassociated from his identity, similar to a cash-only transaction that is difficult to be tracked back. This is made possible because the bitcoin address of the user is anonymous and it changes with every purchase. This however does not mean that Bitcoins are completely anonymous and untraceable, but they are certainly less likely to be linked to one’s personal identity as opposed to other traditional modes of making payments.

No banking charges:

While there are some charges extracted for using virtual currencies, namely the “maker and taker fees,” withdrawal fees, etc, but users of bitcoins do not have to pay any of the traditional banking fees that are usually associated with fiat money. So, no account maintenance fees, no overdraft charges among the endless other charges for the users of bitcoins.

Peer-to-peer:

The system of payments for bitcoins is purely peer-to-peer based. This means that this feature enables the users to receive as well as send payments from and to anyone on their network across the globe without the need for approval from any external authority.

Low international transaction fees:

Typically a standard foreign transaction or wire transfers include exuberant charges. However, since bitcoins do not have an intermediary institution in between the two parties, the transaction costs are really low. This is an extremely beneficial feature for those who occasionally travel. Furthermore, bitcoin transactions are fulfilled fairly quickly since there is no requirement for authorization, thus eliminating any long waiting periods.

Convenient payments:

Just like with any other online payment system, the users of bitcoins can make transactions on the go as long as they have access to the internet. There is no need to visit the bank to carry out a transaction. Additionally, there is no need to supply personal information to complete a payment as is the case with transactions made with a credit card or bank accounts.

Highly accessible:

Bitcoins can be sent or received merely at the click of a button on our smartphones and therefore it is available to a large section of the population who still do not have access to the conventional banking systems or credit cards, enabling them to make payments without any hassle.

How to buy bitcoins in the UAE?

Let us first state clearly that cryptocurrencies do not have a legal issue in the United Arab Emirates. There are cryptocurrency exchanges in the country however that carry out the exchange of such digital currencies. Let us now look at the steps that will help answer the question- how one can buy Bitcoins in the UAE?

Step 1: Sign up to buy Bitcoin-

One has to sign up at one of the exchanges trading in bitcoins. The signing up process is fairly easy> all one has to do is use the Signup link and fill out all the relevant information. Click at the ‘ register’ option and viola! You are all signed up to proceed. The Signup process is then followed by a KYC (Know Your Customer) procedure. This KYC has to be completed in order for withdrawals to be made.

Step2: Deposit AED for buying Bitcoin-

Once you have successfully completed the signup process, the traders have to deposit AED into their digital wallet and utilize this amount to buy bitcoins. Currently, traders in the UAE can accumulate AED into their wallets by utilizing the USDT P2P method. This enables them to easily buy USDT using their amount in AED. Using the USDT the traders can further buy any of these cryptocurrencies: Bitcoins (BTC), Bitcoin Cash ABS (BCHABC), BitTorrent Token (BTT), Cardano (ADA), Etherreum (ETH), Stellar (XLM), Ripple (XRP), Neo (NEO), Skycoin (SKY) among others.

Step 3: Buying Orders-

The cryptocurrencies can be bought using different order types available on the exchanges. The order types are as follows: Limit orders, Stop limit orders, and Bracket orders. Choose one that is best suited for your requirements and you can start trading instantly!

Step 4: Safe storage-

The cryptocurrency wallets like a Bitcoin wallet are a safe place for storing your digital assets. Having cryptocurrency outside the exchange and in your private wallet makes sure that you have sole control over the private key of your funds. This also enables you to be able to store funds outside your exchange while avoiding any risk of your exchange getting hacked that might result in you losing all your funds.

Best exchanges to buy Bitcoin in the UAE:

To make it easy for you to pick an exchange, we have listed the most popular ones that trade in bitcoins in the UAE-

1. Rain

2. Binance

3. eToro

4. BitOasis

5. Kraken

In a Nutshell

The supporters of bitcoins believe that digital currency is the future. People who endorse these cryptocurrencies believe that they facilitate a faster, low-payment fee system of making transactions all around the world. Even though they are decentralized and are not backed by any authority, they can also be exchanged for traditional currency. They have quickly taken over the world as an alternative to the national fiat monetary system as well as traditional commodities like gold. So, whether the virtual currency is the future or not, they are certainly paying high returns in the present!