Bitcoin is a new form of digital currency, created and used only in electronic form. Nobody controls this type of digital currency. Bitcoins are not printed like dollars, euros and other money in paper form – they are produced by people and increasingly become enterprises that manage computers around the world, using only software that solves the mathematical problems of large companies or private users who are willing to pay for using Computer power and its computer time.
What distinguishes it from ordinary currencies?
Bitcoin can be used to buy things or services electronically. In this sense, it is like ordinary dollars, euros or yen, which are also sold digitally.
However, the most important characteristic of bitcoins and what distinguishes it from ordinary money is that it is decentralized. No institution controls the bitcoin network. This puts some people in peace, because this means that a large bank can not control its money.
Who created it?
A software developer called Satoshi Nakamoto suggested bitcoin, which was an electronic payment system based on mathematical evidence. The idea was to create a currency independent of any central bank or any bank in the world, transmitted electronically, more or less instantly, with a very low commission for transactions.
Who types Bitcoin?
No one. This currency is not physically printed in the shadow by a central bank that is incomprehensible to the public, and creates its own rules. These banks can simply make more money to cover the public debt, thereby devaluing their currency.
Instead, bitcoin is created in only a digital form by a community of people, to which everyone can join. Bitcoins are “extracted” using computing power in a distributed network.
This network also processes transactions made with virtual currency, effectively making the bitmoney own payment network.
So you can not release unlimited bitcoin?
It’s right. The protocol bitcoin – the rules that make the work bitcoin – say that only the mayyers can create only 21 million bitcoin. However, these coins can be divided into smaller parts (the smallest divisible sum is a hundred millionth bitcoin and is called “Satoshi”, after the founder bitcoin).
The usual currency is based on gold, silver or other rare metals. Theoretically, you knew that if you pass the dollar in a bank, you can return the gold (although in practice it practically does not work). But bitcoin is not based on gold; It is based on mathematics.
All over the world, people use software that follow the mathematical formula for bitcoins. The mathematical formula is freely available, so anyone can check it.
The software is also open source, which means that anyone can look at it to make sure that it does what it should.
What are the main characteristics of bitcoin?
Bitcoin has several important functions that distinguish it from government-backed currencies.
1. It is decentralized
The network of bitcoins is not controlled by one central authority. Each machine that runs bitcoin and processes transactions is part of the network, and the machines work together. This means that theoretically one central authority can not tinker with monetary policy and cause a crisis – or simply decides to discard from them the garbage from people, as the Central Bank decided in Cyprus in early 2013. And if some of the network is shut down for some reason, the money continues to flow.
2. Bitcoin Easy to set up
Ordinary banks force you to jump through hoops just to open a bank account. Setting up trading accounts for payment is another task of Kafkaeski, pursued by the bureaucracy. However, you can configure the bit-address in seconds, no questions and without any fees.
3. Bitcoin anonymous
Well, sort of. Users can store multiple bitlock addresses, and they are not associated with names, addresses or other personal identification information. But…
4. It’s completely transparent
… bitcoin stores data about every transaction that has ever happened on the Internet, in a huge version of the main book called a block-chain. The block-chain tells everything.
If you have a common bitcoin address, you can specify how many bitcops are stored at this address. They just do not know it’s yours.
There are measures that many people can take to make their activities more opaque in the bitcoins network, although, for example, do not use the same bitcoin addresses consistently and do not transfer a lot of bitcoin to one address.
5. Transaction fees are minimal
Your bank may charge a fee for international transfers of £ 10. Sometimes an international transfer can cost the customer more than 50 euros. Bitcoin does not do this. When transferring bitcoin, no commission is taken.
6. It’s fast
You can send money anywhere, to any grief of the world, or to any user by paying for services or goods, and they will arrive in a few minutes as soon as the bitlock network processes the payment.
7. This is not refundable
When your bitcoin are sent, they can not be returned if the recipient does not return them to you. They’re gone forever. Remember this when making a trunk.
Thus, bitcoin much goes for this, theoretically. But how does it work, in practice? Learn more about how bitcoins are produced, what happens when bitcoin occurs, and how the network tracks everything.