How Are Bitcoins traded?
Unlike traditional cash currencies that rely on physical transactions, Bitcoins rely heavily on digital versions of these transactions, much like transferring finances from one bank account to another. Bitcoin itself is a modern take on an age old method of payment, so much so that it can be utilized by most smart phone, tablet and personal computer users with access to the internet, across the entire world.
Bitcoins themselves act in much the same way as traditional currencies, but instead of a buyer having to physically enter a location and make a purchase, Bitcoin users can transfer Bitcoins via their digital wallets to other users that use the same platform. For most users, Bitcoin is simply a platform that enables them to make payments for goods and services received. These services can be anything, but most will be digital. Once a trade has been initiated, a buyer can send payment in the form of Bitcoins, which when received will result in the product becoming available to the purchaser.
That’s exactly how a trade works when using Bitcoin. Imagine that you’ve walked into your local grocery store to purchase a carton of milk; you’ll select your goods, visit the cash register and give your money to the cashier. Once the payment has been received, you are free to leave the premises with your purchase and you can then use it as you will.
From the buyer’s perspective they can purchase any number of goods and products in this way, as long as the seller accepts Bitcoins as a method of payment. Things differ slightly for the seller when trading though, and these differences can often result in a much more preferred method of transaction than if they were to sell their goods in a store.
This is because of the reward process that Bitcoin policies dictate. For every trade of transaction that takes place between a buyer and a seller, a record of the transaction will be documented and then recorded within the central ledger that Bitcoin utilizes for all transactions. This central ledger is available to the general public and can be viewed by anyone, making purchases and transaction histories very informative for specific industries and research areas.
As a reward for allowing the transaction to be displayed publically, the seller will receive transaction fees and Bitcoins in payment for their efforts. These Bitcoins can then be used for further transactions, or to accumulate within the user’s Bitcoin Wallet. A buyer will also receive a benefit beyond their purchased product; they’ll receive bonus Bitcoins that can also be used to make purchases from sellers in the future.
It’s this method of trading that makes Bitcoins so valuable. As people continue to use Bitcoins for transactions, the trading process will become easier and easier. The process itself is very simple (a request or transfer of payment from a buyer’s Bitcoin account, details on the amount of Bitcoins to transfer and then a recipients Bitcoin address), the entire trading activity is as easy, if not easier, than purchasing with physical currencies.