What is Bitcoin?
What is bitcoin?
Bitcoin (bit – the minimum unit of information and coin – coin) – a payment system based on P2P technology (English peer-to-peer – peer to peer). The principle of its operation is based on an open data transfer protocol. The system uses the Bitcoin unit of the same name, the first and most famous cryptocurrency. The main feature of Bitcoin is called complete decentralization.
What does it mean?
Bitcoin works without the participation of any regulatory authority or central bank, coin issuance and transaction processing are carried out collectively by network participants. Thus, no one can control bitcoin, block or cancel a transaction. However, anyone can join the network.
What is the difference between bitcoin and electronic money (WebMoney and others)?
WebMoney and others – all of these platforms are payment systems through which transactions with various “traditional” currencies are carried out – rubles, hryvnias, dollars, euros, etc. In essence, this is electronic money equivalent to their face value in a particular currency. Bitcoin is generated by users themselves at the expense of computer power. Its price is formed under the influence of market forces (supply and demand).
Bitcoin users do not need to go through the cumbersome and often lengthy authentication associated with downloading personal documents. In addition, transactions in cryptocurrency are favorably distinguished by a low commission size.
How can I use bitcoins?
Bitcoin is a relatively young phenomenon, however, today there are a lot of opportunities for its use as a means of payment when buying real goods or services.
These are inexpensive transfers of funds between users, and it does not matter at what distance the sender and the receiver are from each other. You can pay for bitcoins in some catering establishments, hotels, buy airline tickets, digital content, hosting sites and domains, pay for training courses, software, legal services, make purchases in online stores and use taxi services. There are special services that allow using Bitcoin to replenish the phone account. The number of online casinos that allow you to make a deposit in cryptocurrency is growing.
You can also find examples where digital currency was used for expensive acquisitions: houses, cars and yachts.
Finally, many enthusiasts see Bitcoin as a long-term investment, as well as an attractive asset for trading.
Who invented bitcoin?
The concept of bitcoin was first described in a technical document published on October 31, 2008. Its author was Satoshi Nakamoto, but it is still unknown who exactly is hiding behind this name – whether it is one person or a group of developers. The development community is now responsible for the further development and coordination of the network. However, this does not mean that only developers make decisions about which direction Bitcoin will move. Any significant changes in the protocol are possible only after the majority of pools, associations of owners of computer capacities, agree with them, due to which new bitcoins are “born”.
And how are new bitcoins “born”?
The emergence of new bitcoins can be compared with the issue of money, only instead of government agencies that print new banknotes, the cryptocurrency is produced by the users themselves. This process is called mining. It is built on computers solving complex mathematical problems. At the same time, computers are located in different parts of the world, and miners are combined into pools for greater efficiency. For their work, they receive a certain reward.
It is believed that Bitcoin is a financial pyramid …
This is not true. The financial pyramid, promising unrealistically high profits, assumes that the income of the participants in the structure is ensured by the constant attraction of funds. The income to the first participants of the pyramid is paid from the contributions of subsequent participants. As soon as the influx of funds is significantly weakened or stopped, the whole scheme falls apart, leaving a small number of the “chosen ones” “in fat”.
Bitcoin does not promise any benefits to investors. His only promise is complete control over his own finances. And even if we accept the assumption that the demand for cryptocurrency from beginners or professional investors can lead to an increase in the exchange rate, early participants do not receive any dividends from new ones. Finally, the very distributed nature of bitcoin implies the absence of any single central structure that could benefit financially.
What is the value of bitcoin made up of?
There is an opinion that the price of bitcoin is not supported by anything. According to James Rickards, the author of the bestselling book “Currency Wars,” any currency in the history of money is backed by trust, the same goes for cryptocurrencies. In the Bitcoin community, this trust is called consensus.
Bitcoin’s value also stems from its network effect: the more participants, the higher the price. Remaining an experimental technology, Bitcoin is subject to significant price fluctuations, which are used by traders and ordinary holders.
Bitcoin value can also be called its limited emission. In addition, the first cryptocurrency opened the world to blockchain – the rapidly gaining popularity of distributed registry technology.
How limited is bitcoin emission?
New bitcoins are generated every time a new transaction block is found. The frequency of creating such blocks is constant: 6 units / hour. The number of bitcoins in the block periodically decreases – every four years, the so-called “halving” occurs, that is, a halving of the reward to miners. Thus, there is a precisely scheduled schedule of Bitcoin emissions, and the total amount of coins that will ever be issued is also known: 21 million. The last issue is due to take place around 2140.
Bitcoin is said to be anonymous. This is true?
This is another common misconception. Rather, we can talk about pseudo-anonymity. In other words, any person can see the movement of funds and the current balance of the address, but it’s rather difficult to say to whom exactly they belong.
However, if you wish, you can track the IP address of the sender, even if it is not stored on the blockchain. For example, server owners of some wallet providers have this information. To date, sufficiently effective tools for transaction analysis have already been developed. Their functionality allows cryptocurrency companies to instantly find out how reliable their counterparty is and whether it operates with funds that were previously used in illegal financial transactions.
Where can I buy bitcoin?
There are several quite reliable and quick ways to acquire bitcoins. Firstly, this can be done through exchanges that allow you to deposit fiat currencies. First, you need to replenish your account with one of the available methods, and then purchase cryptocurrency.
Secondly, this can be done through various exchange services. On such sites, you can buy bitcoin for fiat currencies (dollar, ruble or hryvnia) and using various payment systems: Perfect Money, Advanced Cash, Skrill, Payeer, etc.
Some services offer the purchase of cryptocurrency using bank cards, mainly in North America and Western Europe. Also, bitcoin can be bought in person, having previously found a party interested in the transaction. This method, however, is fraught with risks of meeting scammers, so it is worth using it only as a last resort.