What is bitcoin?

Cryptocurrency Posted by admin on Tue, Mar 26th, 2019 @ 7:05:34 PM 443 0

Bitcoin is a digital currency. The first to emerge and that was in 2009. Cryptocurrency or digital money is not based on a gold standard, as with a normal payment system, but a digital program. The programmer is known by the name Satoshi Nakamoto, which has just turned out to be a pseudonym and probably conceals an entire network.

Difference with a normal payment system

A payment system as we know of the money in circulation as dollars, euros, pounds and with which we pay daily, is based on a central control unit. Everyone knows what the National Bank is and that thousands of employees are paid at work. With Bitcoin and other crypto coins, the check is simply done by voluntary coders and the code is executed by an open global network of computers.

The problem of dual usability

The most fervent defenders of digital money are individuals and groups who do not feel comfortable with the control of banks and state governments over their money. Behind cryptocurrency is not such a central system but a decentralized one. Because there is no control that sees to it that digital money is only used once per transaction, they have to find a solution that digital files can be copied very easily. Bitcoin solves this problem of double spending in an ingenious way consisting of a combination of cryptography and economic incentive. The bank simply checks this function. With digital money it lies with a divided and open network that is not owned by anyone.

Some specific features of the Bitcoin

The number of Bitcoins that will ever exist is finite

Unlimited stocks of ordinary money or fiat currencies are available and you regularly hear that money is being made. Central banks can spend as much as they want, allowing them to try to manipulate the value of one currency against the other. The holder (or the saving citizen) bears the costs without being able to change much.

On the other hand, the Bitcoin offer is under strict control of the underlying algorithm. The number of new Bitcoins is constantly decreasing and continues to do so with a decreasing speed until a maximum of 21 million has been reached. It means that if demand grows and the supply remains the same, the value will increase.

Pseudonymity of the user

With normal money transactions such as deposits and refunds, users are always known by name. Bitcoin users, on the other hand, work half anomically. The protocol checks for previous transactions and does not have to know the sender. This is to know whether he has the necessary funds. The identification of the user is done by the address of the wallet. Transactions can be traced in this way. However, the police have methods to identify users if necessary.

Exchange services are under legal pressure to the extent that an identity check must be possible before they can sell or buy bitcoin. That makes the network transparent, the progress of a certain transaction must be visible to everyone. This is not ideal for criminals, terrorists and money scrubbers.

Immutability

Bitcoin transactions cannot be reversed as well as electronic fiat transactions. Does this sound disturbing? It also means that no transaction can be tampered with on the entire network and that should reassure us all.

Divisibility

The smallest unit of a Bitcoin is called a Satoshi .
It is one hundred millionth part of a bitcoin (0.00000001) – or at current prices, about one hundredth of a cent. As a result, micro transactions are possible with Bitcoin that cannot be done with traditional electronic money.