“What is Bitcoin?” – This question is still asking, every day, many people around the world. In order to meet human curiosity and share our knowledge with the world, in this article we will explain the specifications of this digital asset, its genesis and the idea that called them to live.
Bitcoin is an innovative, digital currency of the information era, also called “gold gold”.
What is Bitcoin?
Bitcoin (in short BTC) is a decentralized, i.e. deprived of a central emission institution, a digital currency. As such, it remains independent of banks, governments and other organizations intermediably in its exchange. This is a global currency, which is at the disposal wherever access to the Internet is possible. Bitcoin is a means of payment that can be quickly sent to anywhere in the world, bypassing banks and intermediaries. Thanks to this, we also eliminate:
- often expensive commissions
- time limits
- technological restrictions.
Some of Bitcoin’s features and functions, such as its intangible nature or being a carrier for storing values, have been repeatedly and exhaustively described. This time we will try to look inside, and at the same time the foundations and the origin of the idea of Bitcoin, to answer the bothering question about what Bitcoin is as possible.
Bitcoin is information
Information to which all people connected to the network have access. Each of them can verify its correctness. In addition, Bitcoin has an open source code. Thanks to this, everyone, at any time, can get insight into its action. Of course, this requires adequate knowledge in the field of technology.
Bitcoin is a network
BTC is the internet currency and works on the P2P transmission principles: Peer to Peer). It is a kind of communication between computers, based on an equivalent network, i.e. one in which all users have equal permissions. In practice, this means that nobody controls or exercises the chief power over the bitcoin network. His infrastructure does not have a top -down manager or the superior owner who would directly derive profits from its functioning. Instead, Bitcoin is kept by a community, whose each participant has the same rights and privileges. Thanks to this, despite the anonymity of each member of the network separately, all transactions are fully transparent and visible to other participants.
What’s more, all changes made in the Bitcoin protocol must be approved democratically by the appropriate number of network users. The creator of Bitcoin himself – Satoshi Nakamoto – in terms of changes in the protocol, he would now have little to say if the community did not support his ideas. This very important property of BTC gives us, users confidence that no one will be able to block or appropriated our digital assets.
How can we be sure that BTC is safe?
Bitcoin is based on mathematics and cryptography. His code prevents artificial reprint, blocking or falsification of cryptocurrencies, which in effect prevents the supply. While maintaining basic security measures, our bitcoins cannot be confiscated by “higher forces” (e.g. government, bank, bailiff or spouse in divorce). Bitcoin therefore provides us with a 100% guarantee of ownership of our money.
Limited supply
Bitcoin is a limited currency in the context of quantity. Unlike banknotes, the number of which does not have a specified circulation limit, only 21 million may arise. At the day of writing this article, there are 18.74 million bitcoins in circulation, i.e. 89% of the entire available supply. You can check the current amount of bitcoins in circulation, among others on the Coinpaprika website, in the “available resources” column.
Limited supply makes it an inflation resistant act. Equally important, BTC is a currency divisible to 8 decimal places. Thanks to this, regardless of the Bitcoin price in a few years, we will be able to pay with it, e.g. for coffee or everyday shopping.
Bitcoin is an anonymous currency, and at the same time fully transparent. All transactions on the web are public and you can use them to trace the complete path of each bitcoin in circulation. The transactions and perceived people are included in the settlements only as a string of numbers and characters – the so -called public portfolios.
Is Bitcoin money?
Money is a material or intangible good, known as a result of general consent as a means of economic exchange. Due to the convenience and equal conversion, all prices and values of goods or services are expressed in it. Once they were stones and shells, today we have banknotes and balances saved electronically.
Every money must have at least three basic features:
- It is possible to demonstrate that a given amount of money is the property of a given user.
- It is possible to transfer the ownership of a given amount of money from one user to another.
- After transferring a given amount, its original owner loses the right to the money transferred.
Bitcoin contains each of the above features. What’s more, it responds more accurately to the need for each of them, thanks to two cryptographic mechanisms:
- Digital signatures based on a public key, allowing for authentication of transactions on the web.
- Abbreviation function (hash) used to prove the work performed for the Bitcoin network. This is directly related to the Proof of Work algorithm, which assumes a solution to the calculation problem and confirmation of its correctness (which is proof of the work performed for the network).
Does Bitcoin have value?
The current money, which we use every day, is a fiducic money. The etymology of the word can tell us a lot about its specification. The name “Fidujar money” comes from the Latin word fides – That is faith. In this case, we are talking about faith and trust in governments and banks that are responsible for emissions and monetary policy.
Gold parity was in force until 1971. Until then, each banknote or coin produced had to be covered in gold. Currently, central banks emitting currency do not have to think about reflecting it in material goods. Individual countries They have full, guaranteed international law freedom in determining the exchange rate rules of their currencies. The value of such a currency, therefore, comes from a monopoly, which guarantees exclusive emission and is legally reserved by the state for the state. An important support for the value of money is also a fiscal policy, generating the demand for currency and trust of citizens to the state and the stability of its currency.
With the help of mechanisms such as reprinting of money or a change in interest rates, the state determines the value of the funds we have in the portfolio or on your account. We experience a decrease in the purchasing value of each of them by continuous emission of subsequent banknotes. We call this process inflation. So you can argue about whether the forced fiducial money actually goes in harmony with the spirit of the free market?
The free market decides
So if someone asks us “what is Bitcoin?”, We can confidently answer that this is the opposite of fiduci -money, and its value is determined by the free market – demand and supply. Bitcoin cannot be printed, it is resistant to inflation, and its value is independent of governments and banks. For the above -mentioned reasons, Bitcoin is more similar, e.g. to gold (hence the term “gold of the Internet”), because it is difficult to get, its resource is limited and is in the same way subject to the “digging” process (although it takes place on slightly different terms than standard mining). Bitcoin is based on cryptography and calculations, and the element of trust in it is replaced by mathematical evidence.
The value of bitcoin therefore depends on its popularity, usability and difficulty of extraction. From the basics of economics, we know that when demand increases and supply remains at the same level, we can observe an increase in the value of assets. As the amount of bitcoins is limited, and people who want to enter their possession are increasing, we are observing an increase in its value over the years. Within a decade, the number of cryptocurrency users increased to tens of millions and is growing at an exponential rate.
8 biggest advantages of bitcoin
Considering the above, the increase in BTC’s popularity should not be surprised. Not only for several reasons, Bitcoin has an advantage over fiducinating money, but also introduces a completely new quality in the world of finance.
Bitcoin’s biggest advantages are:
- Very fast transactions between any two places in the world. End of several/several -day waiting for the funds to reach the recipient, e.g. in China or the USA.
- Relatively low, barely noticeable commissions for transactions. Especially in the case of transfers for large amounts. For example, a commission for transferring about USD 400 million can be as much as a small coffee in a cafe.
- A certain degree of transaction anonymity, which, however, can be easily increased using tools such as VPN.
- No intermediaries for transfers. The transfer goes directly to the recipient without the participation of banks and other financial institutions.
- Limited number of BTC “digital coins”. It is not possible to reprint a single piece above their maximum, predetermined number – 21 million BTC. This makes Bitcoin more resistant to inflation than traditional currencies.
- It is impossible for someone to block someone else’s account. The system works in the P2P network, so there is no owner or manager who could freeze our funds. While we are discreet and prudent in the context of sharing our private key and we observe the basic principles of Internet safety, our bitcoins are safe and the risk of their marginal loss.
- Inability to withdraw the transaction. If someone pays us for the goods, we are 100% sure that they cannot withdraw the transfer (which happens in banks or in well-known e-paid systems such as PayPal).
- Amazing convenience and independence. Shortly after creating a wallet, we can use Bitcoin without any registration, verification or unnecessary bureaucracy. It should be borne in mind, however, that they may be necessary at the time of paying BTC to FIAT currencies.
What is Bitcoin, to sum up:
Bitcoin is information provided by a decentralized network. The correctness of this information, and thus compliance of the balances, is provided by mathematics and cryptography. Bitcoin solves the problem of long and expensive international transfers, even where banking is limited (e.g. African countries). We will also realize standard national transfers with Bitcoin’s help. This applies to both weekends, holidays and moments when banking systems undergo maintenance. Since its inception – over 10 years ago – the Bitcoin network is active for 99.98% of the time. This means only 2 days break in the availability of the network over a decade.
Bitcoin works great in internet micropayments and international trade. BTC is a digital currency and works best on the internet.
Congratulations! You already have basic knowledge about what Bitcoin is and you know more than 99% of society about it. Do you want to deepen your knowledge and understand how Bitcoin works? Or maybe you prefer to find out how you can become the owner of your first Bitcoins?