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Everything About Bitcoin

12:09 18/12/2017

Bitcoin price jumps up and down, and these movements keep attracting a lot of attention. Still, there are many people who don’t even know about cryptocurrencies. To disclose useful information about all these terms and meanings, we got this article prepared.

 

Basics

 

Bitcoin in fact is one of cryptocurrencies that does not exist in the real world. There is no paper or any other equivalent to hold. It is emitted by a network of peers in a digital form. It is also limited in its maximum amount. Only 21 mln of BTC will exist after the emission ends. There is no centralized governing organization either.

 

Origin

 

Bitcoin was created by an unknown programmer as an open code program in 2009. The creator’s name is Satoshi Nakamoto, and according to rumors, this person is a 37-year-old man who lives in Japan. However, there are too many unclear things in Satoshi’s biography. Namely, he is very good at English and there are no Japanese identifications intrinsic to Japanese software.

 

In 2010, the Bitcoin creator decided to move on. He gave full access to the project to Gavin Andersen and several other well-known members of the Bitcoin community, and then disappeared. According to the records dated September 2017, Nakamoto had approximately $3.6 bln in BTC in his crypto wallets.

 

Freedom

 

Gavin Andersen continued the project management with a full responsibility. His main goal was to keep Bitcoin as decentralized as possible. Such a self-sufficiency is a cornerstone reason for people preferences. They are willing to use digital BTС instead of fiat money that are regulated, governmental dependent, vulnerable to financial crisis and frauds, etc. Furthermore, all operations on blockchain are clear and available for observation to all participants.

 

By all these reasons, Bitcoin can be controlled only as a whole network with all nodes existing in it.

 

Operation algorithm

 

The blockchain name defines the structure of the records. It is a big distributed ledger with many blocks united in a sequential chain. Though, they are not visible just like that, as users can only observe their account statuses and money amount. Due to the block structure, any changes in the previous blocks will influence all related transactions. Thus, they will never go unnoticed and all possible malicious changes will be detected and rejected by the community.

 

The process of network acceptance is quite long. Several hours are required for transaction to be reliably recorded in blockchain. All nodes must separately recalculate digital codes and decide on whether the block is accepted or not.

 

Core Bitcoin features

 

Decentralization

 

Perhaps, decentralization is the key difference between crypto and common fiat money. It is one of the main reasons for people to use it after all. The way it operates involves all the network participants in the storage, generation, verification and mining activities. During all processes, the network stays reliable and independent. It will stop operations only when the last node disappears. The absence of the central management centre guarantees that everyone is equal both in simple participation and in proposals discussion.

 

No personal data

 

This part is extremely attractive to some secretive people. Not a single bit of data that might define your identity is required here. All you need is to download software and press the “start” button. Here, you can be totally confident that your data will not be stolen, sold or whatever. On the other hand, that is exactly why Bitcoin is sharply criticised. The network is often used for conducting illegal money activities, such as drugs selling, slavery, etc.

 

Clearness

 

Even though the network is anonymous, all data about the funds movement is absolutely transparent. Participants can trace any transaction they want at any time. Still, no one can tie wallet addresses to a particular person.

 

There are plenty ways to change some of these features. Some wallets grant increased security, other services require your data to proceed with trading, etc.

 

Rapidness

 

Transactions are distributed within seconds regardless of their parameters.

 

Scam protection

 

Any transaction is irreversible. Once you lose your right to manage funds, there is no way back. Each network member gets a transaction copy and place it in blockchain. This means that there is no way to lie about a transaction failure.

 

Payability

 

Only few organizations accepted BTC as money in the very beginning. Nowadays, things are different. Many countries have terminals proposing you BTC exchange, various websites allows purchasing any cryptocurrency you like. This list is rather big including tourism services, land purchases, donations or charity, etc. The popularity of Bitcoin increases and the number of organizations accepting it goes up as well. Even huge corporations, like Microsoft and Dell, are considering BTC as a payment instrument.

 

Some financial problems are also relevant here. Investments in BTC is favourable because of its volatility. Many market players decide to give it a try and get some profit.  

 

Buying BTC

 

There are three ways to get bitcoins:

 

  • Buy them on an exchange.
  • Buy them from other owners.
  • Mine them.

 

Today, mining is the hardest way to get BTC. But several years ago it used to be the simplest one. It was cheap because of the low target task difficulty. Any computer that had installed software could start mining. But since then, the difficulty increased along with the growing mining capacity. More calculations requires more electricity, so modern mining facilities look like factories or server stations.

 

BTC purchase is the best option to get coins fast. In general, there are two options. You can visit any crypto exchange platform and buy bitcoins there. Or just get in touch with other users who sell cryptocurrencies. Either way, there are several necessary things you need to do to get prepared for the deal.

 

First of all, you have to create a cryptocurrency wallet to store your coins. It can be of any type. The rule is simple: the more “tech” the wallet is, the less secure it is considered. Online wallets can be hacked or just get unavailable. Software wallets can be hacked or broken. The best protected are hardware wallets, but they require a constant maintenance. And finally, paper wallets are reliable until you can data printed or written on it.

 

Bitcoin advantages

 

Independence

 

No central management, no taxes or debts, no limits. These all make Bitcoin attractive. BTC investment has many options and opportunities compared to fiat money. Moreover, digital money requires only a computer or similar devices to trade in the financial markets.

 

Comfort

 

There is no need in massive banking facilities to store your funds. By merely knowing your private key, you can apply any mobile device to manage your account. All actions are performed online.

 

Commission Selection

 

It is totally up to you to decide whether you want to pay a fee or not. The fee you put in the transaction goes to the miner who closes the block.

 

Sometimes miners can even get more profit by getting fees rather than from mining itself. The main purpose of transaction fees is to motivate participants to spend their computational power on mining. Another important feature of fees is the management of transaction acceptance. The higher the fee is, the higher the chance that a miner will add the transaction to the block.

 

No Governmental Institutions

 

Any kind of financial regulations is not applicable for the BTC turnover. All requirements set by Payment Card Industry and similar organizations just do not work. Perhaps, these rules are logical but they are unnecessary for decentralized communities. BTC has its own standards implemented in the protocol and nothing else matters.

 

Major Security And Transparency

 

This is the most reliable part of cryptocurrency. In contradiction to the common fiat money and digital assets held on bank accounts, BTC is available for everyone to observe but for only one to control. A mathematically supported encryption leaves no choice to hackers.

 

No Fake Money

 

You cannot create a false BTC unit, as nobody will ever accept it as legit money.

 

Disadvantages

 

Attempts to Regulate the Sphere

 

Different countries apply different laws to regulate the crypto industry. Some of them support crypto with by applying tax rebates, others, on the contrary, forbid using this type of money. There are also regions that do not take any steps to control this sphere whatsoever.

 

Anyway, the very concept of crypto still remains unclear to governments. Thus, the low level of understanding of the BTC nature push them to generate regulatory policies. This contradicts the main idea of Bitcoin, which is total independence. However, many laws and recommendations already exist.

 

Account Loss

 

Losing a crypto wallet is both hard and easy. It is hard because there might be a copy of the private key on your PC, a piece of paper or whatever, so you could restore access to your funds whenever and wherever you want. On the other hand, you can easily lose your wallet if someone gets private information about your wallet. All money will likely be stolen, and the wallet itself will be considered as lost.

 

Volatile Price

 

Since BTC is not backed by anything, the coin is subjected to serious price fluctuations. It means that there cryptocurrency is not reliable as an investment tool.

 

Ponzi Schemes

 

Some people refuse to get in touch with bitcoin because of its suspicious nature. Even major investors are afraid of potential Ponzi schemes involvement which may result in significant losses. This all comes from the lack of knowledge about blockchain technologies since the whole Bitcoin system is totally transparent.

 

Bubble

 

Many well-known people, such as a Nobel Prize owner Robert Shiller, keep stating that Bitcoin may be a bubble. Shiller believes it is true because of incredible price hikes, the overwhelming popularity of the coin, and others characteristics typical for a bubble scheme.

 

What makes Bitcoin different from other cryptocurrencies?

 

Decentralization

 

Any common fiat currency has a kind of organization it comes from. They are controlled by governments, central banks and other similar authorities. Bitcoin has no central emission point. No authority controls BTC or its emission rate. All these issues are described solely in the protocol.

 

 

Fake protection

 

Counterfeiting money has been a huge problem since currencies were introduced into our society. Every day counterfeiters try to create fake money units in order to use them instead of the real ones. Bitcoin cannot be falsified this way because it is strongly encrypted.

 

Lifetime

 

Real money get old and worn. Since BTC has no physical body, its lifetime is limitless.

 

Transactions stability

 

As soon as a transaction is put into the block, and the block is accepted by the network and verified several times — there is no way back.

 

Global implementation

 

As a ryle, a currency cannot be used in other countries and has to be exchanged for national money. In fact, there are a lot of currencies that worth nothing in the neighbouring regions. BTC has the same value around the globe.

 

Different regulation mechanisms

 

Once BTC got popular, many countries had nothing left to do but accept the crypto sphere in general. For instance, the US regulatory laws consider BTC as a property, while in the EU, bitcoin is a foreign currency. Regardless of this, BTC mining remains a tax-free business that brings a lot of profit to people involved in it.

 
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