Bitcoin is a new digital currency created and working only on the world wide web. Nothing controls it, the currency is issued as a result of the work of billions of computer blocks all over the planet. The program is used for solving algebraic algorithms.
Bitcoin and its differences from the usual electronic money?
Bitcoin is the same currency as the ruble, dollar, and Euro, and it is also traded on the exchange. But, there is one difference between it and the rest of the currency – it is decentralized. It cannot be controlled from the outside.
Who is the Creator of this currency?
By Satoshi Nakamoto. He followed the idea of making currency exchange without government interference, in electronic form, immediately, without delay.
Bitcoins can be "touched" in your hands?
NO. It is only available on the Internet. The issue of bitcoin is possible only in numbers, and anyone can start mining or, as they say, mining bitcoins when they want. Bitcoin mining is a means of computing the power of a computer in the network. When transferring bitcoin, transactions are processed by the same network, converting bitcoin into a payment system.
Can I get a trillion bitcoins?
No. The maximum amount you can mine is 21 million bitcoins. Bitcoins can be divided indefinitely into smaller numbers. 1 Satoshi = 0.00000001 btc.
How is bitcoin secured?
Bitcoin is a mathematical calculation. In ancient times, it was possible to exchange silver for coins and back. You can't do this with bitcoin. To extract bitcoin, you need to run a script that will independently extract bitcoins on your computer. The script code is publicly available.
What are the differences?
Bitcoin has several fundamental differences.
There is no Central control authority for the network, the network is distributed to all participants, and every computer that produces bitcoins is a member of this system. This means that no Central authority has the ability to dictate the rules to bitcoin owners. And even if some part of the network goes offline, the payment system will continue to work stably.
Ease of use
You need to go through seven steps of hell to open a Bank account for a company in our banks, or you may be refused without explanation. This is not a problem for bitcoin, you will need 5 minutes to create a bitcoin wallet and immediately start using it. No questions, no commissions.
Yes. It is completely anonymous and at the same time completely transparent. You can create an infinite number of bitcoin addresses without linking to a name, address, or any other information. However…
Bitcoin stores the entire history of transactions that have ever taken place, called a sequential chain of blocks or blockchain. The block chain knows everything. Therefore, if you have a publicly used bitcoin address, anyone can see how many bitcoins you have in your account. if you did not tell us that this is your address, then no one will ever know that it belongs to you. For complete anonymity, one bitcoin address is usually used for a single transaction.
The Commission is negligible
Your Bank can safely charge $50 Commission for international money transfer. Bitcoin is not.
The speed of translation
You can send money anywhere and to anyone, they will fly in a few minutes, after the bitcoin network processes the payment.
After sending bitcoins to the recipient, it is impossible to return them. Only if the recipient doesn't want to do it.
Bitcoin appeared in 2008-right after the "Occupy Wall Street" movement accused major banks of misusing borrowers funds, defrauding customers, interfering with the financial system and exorbitant fees. The bitcoin pioneers dreamed of passing responsibility for transactions to sellers, eliminating intermediaries, canceling interest rates, and making transactions transparent in order to root out corruption and limit fees. They created a decentralized system where everyone could control their funds and understand what was happening to them. In a relatively short time, bitcoin has gained impressive popularity. It is accepted for payment by companies around the world.
Bitcoin is advertised by websites on the Internet, thematic media publish news about it, large online forums have been discussing the topic of cryptocurrencies for years and issue their own coins. The system has its own programming interface( API), price index, and exchange rate. Of course, there are also problems: hackers, high volatility and transaction delays. However, in some third world countries, bitcoins can become the most reliable channel for receiving or transferring money.
Why do I need bitcoin?
In simple terms, the word "bitcoin" refers to either a virtual currency or the technology on which it is based. You can make transactions with the currency — pay for purchases, receive transfers, and exchange it for cash. For transactions, a special address is used, encrypted with a 16-character key. The buyer decodes the code to transfer bitcoins to the specified address. In other words, a cryptocurrency is a digital exchange that allows you to buy or sell goods and services. The transaction is verified in a peer-to-peer computer network that is similar to Skype or BitTorrent.
Features of the transaction
Without going into technical details, we can say that bitcoin is based on an extensive public database called the blockchain, where all confirmed transactions are included in the so-called "blocks". When a block logs in, it is verified and becomes part of a peer-to-peer (P2P) network. This way, each user has information about each transaction, which helps prevent theft and double spending, in which someone conducts the same transaction twice. This process ensures that users trust the system.
How to store bitcoins?
Let's say Maria wants to buy bitcoins. First, she needs to get a special "wallet" where her cryptocurrency will be placed.
Maria can use three different types of apps.
Desktop, mobile, and browser wallets are the most common; in addition, a wallet can exist "on paper" and in the form of special equipment. Each type of wallet has its own advantages and disadvantages.
How do I buy or sell something with bitcoins?
One of the main features of bitcoin is that it does not have any physical embodiment. All you have are transaction records between different addresses that are stored in the blockchain system. To understand how this process works, let's go back to Maria.
Example of a bitcoin transaction
Maria wants to use bitcoins to order pizza from Nikolai. She sends him her private "key", a sequence of letters and numbers that encodes the data of her transaction, the amount and the public address of Nikolai's digital wallet. Nikolai scans the "key" with his smartphone to decode it. At the same time, the transaction is automatically transmitted to all other network participants (so-called "nodes"), and after about ten minutes is confirmed through certain technical processes known as "mining". This process allows Nikolai to understand whether to allow Maria's transaction.
Mining, or mining — is a process that ensures the security of the bitcoin system by chronologically adding new transactions (or blocks) to the blockchain. Blocks are added when the codes are decrypted, the transaction is completed, and bitcoins are transferred or exchanged. In addition, miners can generate new bitcoins using special software for solving cryptographic problems. This provides a reasonable way to issue currency, as well as motivates users to engage in mining.
The reward for a new block is agreed by all network participants, but usually amounts to 12.5 bitcoins. In addition, part of the miner's profit is made up of fees charged to users who make transactions. To prevent inflation and maintain control over the system, no more than 21 million bitcoins should be in circulation by 2040, so the cryptographic tasks used in mining are becoming more difficult.
How to protect your bitcoins?
As with a regular wallet, store only a small amount of bitcoins on your computer, mobile phone, or in your client for everyday use: it is better to keep other funds at a separate, more secure address, for example, in an offline wallet that is disconnected from the network. Regularly create a backup copy of your wallet. Use a strong password to protect your wallet or smartphone from thieves. Update your software. For additional protection, use the multi-signature feature, which allows the transaction only after several independent confirmations.
What else do you need to know?
Protect your address. Although it is difficult to link a bitcoin address to your real identity, bitcoin remains the most open form of transaction: all participants in the network see your balance and transaction log. This is one of the reasons why you should change your public addresses after each transaction. You can also use multiple wallets for different purposes, so that your total balance and transaction history do not become the property of those who send money to one of them. The number of confirmations. As already mentioned, the transaction must receive a certain number of confirmations from the network to complete. The number of confirmations differs for different wallets and for transactions of different volumes.
The government requires tax on income, sales, wages, and capital gains; this may also apply to bitcoin transactions. The legal status of bitcoin varies from country to country — some governments still prohibit its use. In the United States, the rules are different for each state. In 2016, the only state whose legislation regulated the use of bitcoins was new York. In Russia, the use of bitcoin is not yet regulated, the Bank of Russia is still preparing relevant documents, and its managers still consider bitcoin as a digital commodity.
What are the disadvantages of bitcoin?
Hackers and scammers thrive in the bitcoin system. Attacks occur at least once a week and are becoming more sophisticated. The complexity of bitcoin software, its volatility and slow transactions also discourage many from using the system. You will have to wait at least ten minutes for your network to approve the transaction. Some Reddit users complain that they have to wait more than an hour for confirmation.
What are the advantages of bitcoin?
The best thing about bitcoin is its decentralization. This means that you can make international transactions without suffering from exchange rate differences and without paying additional fees. Bitcoin is free from any interference and manipulation; no Central Bank can raise interest rates at its discretion. The system is transparent, so you know what is happening with your money. You can start accepting bitcoins instantly; you don't need to spend money and energy opening a trading account or buying hardware. Bitcoins cannot be forged, and your client cannot claim a refund.
Money is the equivalent of the cost of goods and services, as well as a means of exchange and savings. Classic currencies such as dollars and euros are called Fiat money and are issued by Central banks. Familiar electronic payment systems such as WebMoney and PayPal operate with Fiat money, being in fact an intermediary between banks and users.
Bitcoin is also a payment system, but it uses its own currency for payments. Bitcoin is the first digital currency that is not controlled by any financial institution. At the same time, bitcoin performs the main functions of money: it can be used to buy or sell services and goods, or as a means of accumulation. This currency is traded on exchanges where, depending on demand, its exchange rate is set against traditional currencies.
The main goal of bitcoin developers was to gain independence from the banking system and reduce transfer fees. According to them, keeping money in modern banks is associated with great risks, namely: funds may be blocked, the Bank may refuse to conduct a transaction, information about account holders and money may be stolen by hackers, Bank fees for transfers are too high. The solution to these problems was suggested by a developer (or group of enthusiasts) named Satoshi Nakamoto.
Users were presented with a system based on an advanced information storage system-blockchain. Blockchain in translation means a chain of blocks in which all transactions occur. To understand how this network works, let's present it as a book. The components of the blockchain are pages-blocks, and transactions serve as records. In order to create a new page in the blockchain Ledger, information about old blocks is processed. It is impossible to remove any component from this system: the blockchain securely stores encrypted data about all transactions that occurred in it.
To create a new page, i.e. a block, you need to solve a mathematical problem. A person who copes with this task with the help of computing equipment receives a reward in bitcoins. Solving these tasks ensures the performance of the entire system and is called mining.
The main difference between the Bitcoin currency and conventional currencies is-decentralization. Bitcoin is not controlled by any banking organization or government structure, the system assumes equality of all participants – this is one of the main principles. Unlike standard payment systems, there are no restrictions on the number of transactions and the amount of transfers.
Full copies or separate parts of the blockchain system are simultaneously stored on the computers of millions of users, so there are currently no mechanisms that would allow you to somehow affect the operation of the network. No one can take control of ongoing operations or cancel them. In theory, this is possible if one of the participants achieves control over 51% of the computer capacity of the system, but in practice it is almost impossible.
When transferring funds to another participant, there is no provision for disclosure of personal information, it is enough to know only the number of the bitcoin wallet. All the system can see is the wallet address. No names, surnames, or other information about senders or recipients. Such data protection is unthinkable when making transfers using conventional payment systems. However, you can use the bitcoin wallet number to find out the number of coins stored in it and view the transaction history. This data is publicly available.
Hacking a bitcoin wallet is not possible. A two-level security system and a unique access code are used to identify the user. All the necessary information is placed in a separate file that only the owner has access to. There is also a disadvantage – if you lose your password or wallet number, you will not be able to restore it. There is simply nowhere to come with a passport, unlike banks or other financial institutions.
It is also impossible to intercept coins during a transaction: the system uses cryptographic algorithms that ensure the reliability of payments. Transactions that are made in the Bitcoin system are not refundable, and the payment cannot be blocked or revoked. But this, in turn, implies a high level of trust between the sender and recipient of digital money. Bitcoins are sent between network members via a system where there are only two persons – the giver and the receiver. The third party has no influence on the exchange.
In order to prevent bitcoin inflation, a gradual restriction of the mass of This currency was provided. In other words, the more people who want to use cryptocurrency, the more expensive it becomes, since the growth of the number of users is faster than the release of new coins. The issue of bitcoins is limited and is only 21 million coins, this is the amount of Bitcoin that is planned to be mined before 2140. According to experts, about 20% of secret keys are currently lost. Due to the mentioned features of the system, it will not be possible to restore them, the coins remain frozen on the accounts forever, which takes them out of circulation and reduces the supply of coins. But in the end, it also increases the value of the remaining available coins.
To date, the popularity of bitcoin has attracted millions of new users to the system, which has increased the load on the network. By the end of 2020, it is projected that the system will require as much electricity as the entire country consumes per year. The capitalization of bitcoin in April 2020 was 120 billion dollars.
Leading countries have recognized bitcoin as a new reality. The most important issue for financial regulators is the anonymity of payments and the possibility of using bitcoin for criminal purposes: tax evasion and financing of prohibited organizations, money laundering, etc. The main factor in the viability of bitcoin is the trust of ordinary people who are ready to use it in their lives. Bitcoin enthusiasts initially considered it a "tool of freedom" that would break financial slavery and destroy banks and inflation.
Who invented bitcoin?
The Creator of bitcoin is considered a programmer from Japan Satoshi Nakamoto. It is likely that this name hides a group of people. It is doubtful that the description of the system is made in pure English, but there was not a word in Japanese. In 2010, Satoshi Nakamoto announced that he had stopped working on the system, and the development of the concept continued without his participation.
How old is bitcoin?
The system description was first published on January 3, 2009.
What does bitcoin look like?
Bitcoin does not have a physical appearance. You can't hold it in your hands. In fact, bitcoin is a program code, a set of characters.
How much Satoshi in 1 bitcoin?
Satoshi – the minimum indivisible part of bitcoin, named after the alleged Creator. 1 bitcoin is equal to 100,000,000 (one hundred million) Satoshi.
Official website of bitcoin
www.bitcoin.org - the official site of the system, where you can find technical details of the network.
How many bitcoins are mined?
In April 2020, 18.3 million coins were mined, which is 85% of the planned issue. This means that in the future, the generation of coins will significantly slow down. Interesting fact, if at the start of the launch, the miner received 50 bitcoins for confirming the transaction and creating a new block, at present, only 12.5 bitcoins are generated by the system for "closing" the block. In may 2020, it will decrease by another half - to 6.25 bitcoins.
Forecasts and prospects of the Bitcoin crypto network
Financial experts and analysts disagree about the future of bitcoin. Some believe that this is an ordinary bubble that will soon burst, and the investors who invested in it will suffer losses. Others, on the contrary, believe that bitcoin has a good future and it will become another means of payment and an asset for investment. The truth is somewhere in between.
The emergence of new cryptocurrencies displaces the position of bitcoin, against which it seems slow and expensive. To date, developers have to solve problems to speed up the passage of bitcoin transactions, prevent possible illegitimate actions and improve the reliability of the system. But despite this, at the moment, bitcoin continues to be a good object for investment as a potential currency of the future.
What is Bitcoin? So, bitcoin is money in digital terms. If viewed from a physical point of view, they can not be touched, put in a wallet or spread out in envelopes for storage. However, there are special registers created to keep track of the movement of bitcoins, namely, who transfers them and where, and how many of them have such coins. Registries in the world of cryptocurrencies are called blockchains.
The principle of bitcoins is very similar to Bank non-cash payments. For example, when paying by card, for example, in a cafe or store, the transfer of physical money does not occur, instead, the Bank register makes changes regarding the transaction.
There are a number of differences between bitcoin and conventional currency, and the main thing here is the decentralized storage of registers of the former. So, storage is not carried out in payment systems and banks, but simultaneously on all PCs that work with bitcoins. This means that absolutely anyone can get all the information for the entire period of the cryptocurrency's existence.
It is noteworthy that additional cryptographic protection is provided for registries. It is not possible to fake it simultaneously for all users. It is also unacceptable to rewrite information in blocks and disclose information that someone has now become the owner of millions. Bitcoin is an electronic currency that provides protection from such frauds. However, experts urge users to exercise caution, as cases of repeated payments with the same coins have already been identified. This suggests that bitcoin is still not a completely secure currency.
Speaking about the appearance of bitcoins, it is immediately worth noting that they are not tied to any state. For example, an ordinary currency is issued within a certain state. On the one hand, this process is closely interconnected with gold reserves, but on the other hand, it is not framed by any framework, so as much money as the state needs, it will print as much. Bitcoins are money that does not belong to any country in the world in any way. The appearance of new coins occurs as a result of servicing this payment network within this very network.
For example, somewhere in Italy, a person paid for dinner in a restaurant with bitcoins. The performed operation must be recorded in the General registry on all PCs connected to the Bitcoin network. This requires a special signature that resembles a sealing wax seal. It is noteworthy that the signature must be calculated, and this is a difficult mathematical task. So, somewhere in America there is a PC that is connected to the Bitcoin network and has just calculated the cryptographic signature made. For this, the PC owner received a "bonus" in the form of a penny of bitcoin. The American put the computer in the mode of calculating cryptographic signatures and now the technology itself works, and the owner's account is periodically replenished with bitcoin kopecks. In other words, bitcoin mining takes place through encryption and reprinting other people's transactions. This process is called mining, which means" mining " bitcoins.
However, it is not bitcoin that is being mined, but sealing wax, which is necessary to protect registries. As a result, the user is awarded a kind of reward for the service. It is worth saying that mining is a separate large section. But in a nutshell, this process can be described as follows:"Expensive equipment, low efficiency, competition with mining megawatt clusters from China, built on the basis of power plants."
Today, The bitcoin cryptocurrency is incredibly popular and in demand all over the world. Electronic coins cause a storm of opinions on their own account of many experts and specialists. Some predict a great future for bitcoin, others say that it is impossible for some reasons. However, the majority is inclined to believe that relatively soon, Fiat money will give way to digital money.
The history of bitcoin begins with the second half of 2008 – the beginning of 2009. That's when the world started talking about bitcoin. The reason for this was a document that was distributed around the world. It contained information about the first cryptocurrency. Thus, the client is released to function with the network and the Genesis block is generated, for which a corresponding reward of 50 bitcoins was intended.
Of course, the history of bitcoin originates in the distant 80 - ies of the last century, because it could not be formed from"nothing". So, in 1983, after a series of research conducted by the scientist David Chaum, a system for sending payments with the function of "blind signature" was created, which thus remained anonymous. For the first time after the appearance of the cryptocurrency, it was able to arouse interest from digital money enthusiasts. Later, miners joined, which are engaged in mining coins, but do not represent much value among many users. Would users know what they lose when they throw away hard drives for garbage or exchange thousands of PTS for one pizza, because today-it's just crazy money.
Bitcoin became especially popular in 2011, when the exchange rate of the cryptocurrency and the dollar was equalized. At that time, the world's first cryptocurrency exchange "MtGox" was formed, and bitcoin became worthy of publication in the popular magazine "Time". Of course, such attention and popularity did not pass by scammers and hackers who began to actively act against the system. This provoked the public acceptance of digital coins in the context of the criminal world, as well as their frequent use in transactions carried out on shadow platforms.
Later, the bitcoin has gained great popularity among users of the network. At that time, numerous cryptocurrency platforms began to be created, through which trading in digital coins became acceptable. Some time later, namely in the spring of 2013, the bitcoin exchange rate exceeded the psychological limit of $ 100. Then began to open new altcoins, among which the most popular and well-known can be called such:
By the way, Monero has started active activities to displace bitcoin from the black market. Now there is a takeover of the world of ICOS, through which funds are collected for their own development, namely through the release of new digital tokens. Now bitcoins are available to pay for services and goods in various stores, restaurants, hotels, and services.
In 2017, the PTS was legally recognized by Japan as a means of payment. Of course, such changes and increased attention to the cryptocurrency have affected its value and, of course, its capitalization, which exceeds the $ 300 billion mark at the moment of "X".
This popularity has led to some shortcomings in the functioning of the system. For example, transactions took too long to complete due to the increasing number of new users. Fees for conducting transactions within the system were also raised. During this period, developers began to work actively, wanting to modernize Bitcoin, which led to the emergence of new platforms. Later, these branches began to be independent, to live separately. The most popular platforms are Bitcoin Gold, Bitcoin Diamond, Bitcoin Cash, and Super Bitcoin. The main difference between such platforms from the original was in the corresponding parameters, namely the block size and the mining order. Thanks to the introduction of new platforms, there was a decrease in the amount of commissions in the systems, and transactions began to be carried out many times faster.
Of course, the history of cryptocurrency can not do without the name of its founder, but here the situation is different. So, the identity of the Creator of bitcoin has not been established to date. Many specialists and experts presented various versions to the world, but none of them was officially confirmed.
It has been 10 years since the Foundation of the digital coin, but the identity of its Creator is still unknown. Among the possible candidates for the place of the pioneer were the following individuals-Nick Sabo, entrepreneur Craig Wright, cryptographer Hal Finney, the Creator of Litecoin Charlie Lee, engineer Dorian Nakamoto, programmer David Kleiman, Elon Musk. And although certain facts and evidence were put forward that each of the mentioned persons has involvement in the creation of an electronic coin, the "suspects" themselves categorically denied their own participation.
It will take a lot of time to get acquainted with the Bitcoin system, because it is an entire Empire with a lot of terms, definitions, advantages, disadvantages, developments, schemes for earning and withdrawing coins. The technology for creating a decentralized currency has been under development by leading world-class programmers for many years. However, for a General introduction to bitcoins, you can study its distinctive features:
1. Direct transactions
All transactions within the system take place directly between participants according to the P2P principle. There can be no third parties for the purpose of introducing mediation. This method provides low Commission amounts and processing speed.
The Bitcoin system does not provide for a main governing body, as well as a main server. The network is managed and maintained through communication nodes that are equal to each other and necessarily independent. Such nodes are located all over the world.
3. The absence of any limits
Many payment systems provide different limits for transactions. This is necessary to prevent a possible system reboot. In addition, in the classic version of the payment system organization, information is stored for a set time, and then automatically deleted so that space is freed up from time to time for new information. However, there is no such thing in the Bitcoin system. There are no different limits on the amount and number of bitcoin transfers, and information about completed transactions is never deleted and is recorded indefinitely.
The system is completely independent of the location of the transaction participants. Any transaction with funds will be performed at the same speed, even if the distance between the sender and the recipient is 5000 km. All this happens because transactions within the bitcoin system receive confirmation of the global system of communication nodes that are connected to It.
Users of the system do not need to enter personal information to register a wallet or send a transaction. Instead of this information, the system uses a personal hashed address, which includes a combination of 27-34 characters. However, the register of transactions is freely available, so everyone who wants to use the system can track the path of the coin from the beginning to the end, namely the current holder.
A very important point, which means that absolutely all transactions within the system are impossible to cancel, stop or block.
The Bitcoin system cannot be hacked and forged. The database is securely protected and stores information about all transactions made in the network, the codes of each spent electronic coin. It uses a cryptographic record of data, anonymity and guarantees complete confidentiality. To get access to bitcoins that are stored on your wallet, you must provide a special password. This private key is issued exclusively to the wallet owner and stored in a special file.
As already noted, bitcoin is a cryptocurrency of the same name transaction system. It is allowed to be used by every willing user who has registered their own wallet in the system and has a certain amount of cryptocurrency.
When a user registers and opens a wallet in the Bitcoin system, they receive a private and public key. The private key is a password for accessing the wallet, that is, it is like a PIN code from a Bank card, which should not be passed to anyone. The public key is the address where the coins are stored, which is similar to a Bank card number. The public key can be passed to other system participants, for example, for making a payment transaction using Bank details.
It is noteworthy that you do not need to go to a Bank or other financial institution to make any transactions. In the system, all operations are performed directly from the wallet, which is very convenient, fast and secure. When sending e-coins, the user only needs to enter the payment amount and the wallet address to which the funds are addressed. After the data is entered and the payment operation has passed, information about the completed action is transmitted to the network. Here, independent users check its validity, and then, if the decision is positive, it is included in the General data register. Only after all these actions, the transaction is confirmed and reflected in the recipient's wallet.
It is noteworthy that in the Bitcoin system, the "sending-receiving" procedure of transactions is noticeably simplified, if we take into account the transfer of funds by classic methods. It can be mastered even by completely inexperienced users, it is only necessary to study the basic instructions. Sending e-currency is easy, since it occurs directly from the sender to the recipient, without providing any intermediaries (for example, a Central service). The only element that somewhat complicates the procedure for conducting transactions in the system is the cryptographic security of information. It guarantees high reliability and decentralized operation of Bitcoin. However, this feature is not visible to every user, since it is activated only when transactions are verified.
The Bitcoin system uses Blockchain technology, which means "block" and "chain". This combination of words speaks for itself and reflects the essence of the system. However, for dummies, it is worth deciphering the essence of the blockchain in more detail. So, this is a chain of blocks containing data relative to transactions. It is somewhat similar to the account book and is stored by each user, while being updated from time to time. It is important that this chain is characterized by continuous action.
The size of a single block of transactions in Bitcoin is 1 MB, and it can include up to several thousand operations. Interestingly, each new block in the chain stores information about completed transactions included in it, as well as all past blocks. To sync new and previous blocks, you need to use a special hashed headers. A block can only be included in the main network if all transactions that are included in it are verified. The assignment of the individual title is on the same terms. As soon as verification is confirmed, the block receives a header and is included in the main network. From this point on, all possible changes cannot be made to the block in any way.
Experts note that blockchain technology is the next step in an easier and safer future. Thanks to this technology, it is possible to store absolutely any information. This technology is considered to be in demand in places where it is necessary to keep records and synchronize information. Even today it is used in the implementation of projects in the private and public character.
The essence of the Bitcoin system and blockchain technology is in the source code, which is open. This property ensures that the communication node is fully functional for any user and that changes are made to the system. Additionally, using the source code of Bitcoin, a huge number of other cryptocurrencies and projects were developed.
Special attention should be paid to the individual electronic signature that is assigned to each user of the system when they register their own wallet for cryptocurrency. The signature is in some way a password when entering the wallet, as well as a code word used when confirming any actions that occur in the wallet. The electronic signature acts as a hash function of the public address of the account in the Bitcoin system, which includes a combination of several characters.
The significant advantages of cryptocurrency include the following points:
1. Brand awareness
The degree of popularity and notoriety of the Bitcoin system is currently prohibitive. Almost everyone has heard about this cryptocurrency from various sources – news on TV, Newspapers, magazines, the Internet, videos on YouTube. Saying the word "bitcoin" is no longer necessary to further explain its definition in detail. Everyone knows that with the help of such a cryptocurrency and the system as a whole, you can earn good money. If we talk about large investments and business, most offices will prefer to cooperate with bitcoin, rather than with another unknown coin. Why? Office owners today can safely assume that bitcoin will either grow in value, or there will be a sense of selling it on the market in order to obtain their own benefits. If you take a risk in favor of little-known coins, then you will have to wait for some time for the market to Mature for their purchase in mass mode.
2. Highly developed infrastructure
Many exchanges were trading bitcoins long before the appearance of Ether, various tokens. Today, you can make transactions with cryptocurrency almost everywhere, even for Fiat money from various countries. There were also exchanges where many people are ready to exchange bitcoin for cash. It is also necessary to note the services that allow the introduction of accepting electronic coins on the websites of stores and firms that have access to accepting bitcoins. It is the buying and selling operations that are usually carried out using bitcoin, and later exchanging it for Fiat money. The service also provides for wallets that serve users for more than one year, services that allow you to store bitcoins in the cloud.
3. Own history
Trust is a fickle and extremely vulnerable concept. It is very easy to lose it without any possibility to restore it. If we talk about the Bitcoin system, it has been on the market for more than 9 years. During this time, she managed to become completely recognizable from the completely unknown. However, this path is full of bumps and holes. So, at first, only big enthusiasts were aware of bitcoin, later it became a subject for laundering dirty money, and then it transformed into the main driver of investment in cryptocurrencies.
Today, the Bitcoin system includes a huge amount of funds, so in fact it began to exist not only in virtual mode. Previously, bitcoin was a set of bytes in the blockchain, and later a section of the volume of dollars spent on its purchase was added to it. For example, a user spent $ 10,000 to acquire data bytes, so they probably won't want to sell them for less.
Due to the established relationships between people in a contractual context and the exchange of Fiat money, the cryptocurrency market can change. So, it is quite possible to repeatedly increase the value of the coin for 1 trading day by 1 thousand dollars. During the history of the digital currency, its value could fall extremely low in one day, and then immediately rise, exceeding the previous mark by several times.
Bitcoin is also characterized by the presence of educational material in different languages of the world. Absolutely every user has the opportunity to study an article, view a video, and attend a conference in order to get more in-depth knowledge of the coin. Today, there are a huge number of analytical sites with information about currency forecasts, news channels, and various thematic books.
There is a cyclical relationship and they look like this: bitcoin occupies a large part of the market – bitcoin is sold and is "on the tongue" of many people. Accordingly, the more people talk about this cryptocurrency, the more it will expand the impact area and cover the market. Of course, it is impossible not to note the growing popularity of other coins, but it is bitcoin that is the driving force.
The main disadvantages of bitcoin include the following points:
1. High cost of commissions
Of course, in Bitcoin, you can not pay a Commission at all, but this decision will significantly slow down the process of moving the transaction. This means that the speed of the transaction depends proportionally on the Commission amount. The higher the amount the user is willing to pay, the faster the operation will be performed. It is noteworthy that the more space in bytes a particular account occupies, the more the miner plans to get funds for adding it to the block. Why is this happening?
So, each block is characterized by a corresponding fixed size in bytes, so each miner wants to include as many transactions as possible in this block and get a Commission for each account. The standard block size in the blockchain is 1 MB. Settings of the miner software play an important role here, as they affect the type of transactions that fall into the block. Most often, accounts with a higher Commission first "come in" and then with a lower one.
The size of the account is strongly influenced by outputs and inputs. For example, a user's address received funds from one sender, and he in turn transferred them all to another user. In this situation, it means one exit and one input. However, if the transfer of funds is partial, that is, 1/3 of the total amount "leaves", and the rest remains, then it means one input and two outputs. The first output is 1/3 of the transfer, the second is the remainder or change sent to the address of its owner. If the user received 10 payments in the amount of 0.1 each, and they should be transferred to 100 addresses of 0.01, then there are 10 inputs and 100 outputs.
The number of inputs and outputs affects the transaction weight in bytes. In addition, older inputs provide more expensive service for a particular transaction.
So, the amount of the Commission is not set, but if the cryptocurrency exchange rate is high, it is a considerable amount. It is not profitable to transfer accounts with small amounts, since the Commission is particularly high and completely disproportionate.
2. Slow transaction processing
If we consider the blockchain of the original cryptocurrency, it is possible to perform several transactions per second (for example, from 3 to 7). However, for a number of reasons, these values are currently considered invalid and too slow. Why? Now the cost of one PTC is several thousand dollars, and most users Express a desire to buy or sell it, many sites have begun to actively implement bitcoin in their payment methods. This indicates a huge increase in interest in cryptocurrency and, consequently, an increase in the number of transactions carried out in the system. For example, the Visa system is able to conduct about 2000 transactions per second. That is, when paying for a Cup of coffee in a cafe with a Bank card, a person gets the opportunity to immediately drink the purchased drink. However, in the case of bitcoins, this is unlikely to be possible, because you will need to wait from about 10 minutes to several days for the transaction to take place. Today, there are already such cryptocurrencies that initially provide for a high speed of operations, but this does not apply to the Bitcoin system.
3. Large size of the blockchain
If 3 years ago, the bitcoin network took up about 30 GB of hard disk space, this size has increased significantly over time. Even today, it is more than 150 GB and does not stop in its own growth. Therefore, if you want to install a wallet in the Bitcoin system, you must immediately allocate at least 20 GB on your hard disk. However, we can not say that this problem is very serious, but it is somewhat complicated. So, during the initial installation, you will need to pump all 150 gigabytes from the network, check all the information, and sync. This process can take up to several days.
4. Attack 51%
Not every user is familiar with the" 51% attack", but it takes place in the bitcoin blockchain. What does it mean? As soon as one of the system users becomes the owner of 51% of the network, they will be able to record any information in the blockchain. For example, the owner of such a number of shares can attribute a certain number of bitcoins to himself, conduct false transactions, then generate 6 blocks in a row and send the blockchain only to its chain. Experts note that they considered this type of attack as possible, but the owner of 51% of the network will be more profitable to mine PTS with this power than to wind up transactions. Otherwise, the system will lose the trust of people who will stop participating in blockchains as a result, and the cryptocurrency will quickly lose its value.
If we consider the definition from a technical point of view, it can not be called correct, but it very accurately conveys the entire essence. In order for the cryptocurrency to enter General use, the code and technology were tested and run-in by programmers. Even the founder of the system namaynil 1 million bitcoins at a time when it was possible through a home PC. Of course, Satoshi was not the only such user. If you think about it, then somewhere there is a user who has a million aircraft, the cost of one of which is 10 thousand dollars, and he got it for free. What would happen if he "threw" them into the system? I can't even imagine it.
6. The difficulty level of mining
As already noted, previously, bitcoins could be extracted on a normal home PC. However, over time, it became necessary to purchase a video card, today you need to buy ASICS that work out their own cost for a long time. Many production facilities are located in China – entire factory workshops and hangars are being built here for mining. Of course, the average user can't compete with such hardware, even if they use pools. To carry out mining, it is currently recommended to pay attention to other cryptocurrencies. The current situation may well change, as China has become actively pressuring miners to leave the country. However, there is a high probability that they will be displaced in the new place.
Having understood the advantages and disadvantages of bitcoin, it is necessary to consider such criteria, which are difficult to attribute to both the first and second. This is the price and anonymity.
This factor in the context of bitcoin can be both an advantage and a disadvantage. So, if the cost of cryptocurrency is high, it causes a restriction on entering the market for people who have a small amount of funds, but it attracts organizations and people who own large capitals. It is interesting that it is too expensive to buy electronic coins, but it is quite pleasant to sell them at a more expensive cost.
The variability of the coin value gives users the opportunity to multiply and lose their own investments with a particular decision. Here, the user's criteria such as experience, patience, calculation, and calmness are important.
In addition, there is no accurate information about the amount of money that is actually invested to date. This means that it is impossible to calculate even approximately the actual value of an electronic coin.
Anonymity is a rather controversial criterion that can cause both harm and good. In order to remain anonymous, certain rules must be followed:
These rules are not fully presented, but even if you know them completely and thoroughly, it will not be difficult to allow them to be violated. In other words, anonymity when mistakes are made does not become anonymity at all. Of course, scammers will not identify a particular user, but organized targeted attacks are quite possible.
In light of recent events, the question of bitcoin mining remains open. It consists in solving computational problems using special devices that are located in different parts of the world. Their main goal is to get virtual coins, i.e. bitcoins. This process is safe and the reason for this is the lack of centralization of mining, that is, a single controlling center.
Transactions that occur within the network are necessarily included in the log, after which they are passed to the miners in order of priority. Miners, in turn, are required to provide a search among the many valid combinations of the "hash". It is important that the "hash" found matches every transaction made recently, as well as the individual secret key. If the "hash" is found, the manner is rewarded in the form of a BTS, but it also takes a little work to get it, because thousands of users are fighting for it at the same time. When the hash is found, the transaction block is closed, after which the queue moves to the next one.
What is included in the hash block:
It is noteworthy that the conditions change regularly, which determines the complexity of mining. So, changes are made every 2016 detected blocks (this is about every two weeks).
In addition to mining, there are other types of obtaining bitcoins. You can buy bitcoins in several ways, the main ones are presented below:
So, you can buy cryptocurrency in several ways. Each user of the system chooses the most suitable option for themselves.
There are also several ways to sell bitcoins. The most popular ones are listed below:
Each cryptocurrency owner has several options for selling it and exchanging it for Fiat money. Which should be chosen in a particular case, it is up to the user to decide directly.
To be able to store bitcoin, you must first create an electronic wallet in the system. There are three types of applications that can be used to create wallets:
There are also browser-based, desktop and mobile wallets, and the wallet can be presented in a paper version. Of course, each type of wallet has its own disadvantages and advantages.
How many bitcoins are there in Total?
Answer the question: "How many bitcoins can be mined in total?» simply. According to the settings of the cryptocurrency mining program, there is a limit on the issue. It is limited to 21 million coins. If you take into account the frequency of block formation, which is repeated every 10 minutes, the amount of 21 million seems relatively small. But it is also important to take into account the principle of inverse geometric progression, which is also embedded in the emission. According to this principle, every four years the number of coins that were received for the formation of new blocks is halved (halving).
The issue of bitcoins is the process of forming new blocks in the blockchain chain, which includes transactions in the network. As already noted, generation usually takes 10 minutes. This means that six blocks can be extracted in one hour. Each educated element provides a corresponding reward, which is reduced every four years. Recall that at the time of the formation of the Bitcoin system, the reward was 50 coins per block, and in 2018 this value decreased to 12.5 bitcoins. And in may 2020, it will decrease to 6.25 coins. Rewards are reduced and virtual money is issued based on a clear algorithm.
It is also known that the issue of bitcoins is limited and amounts to 21 million coins. This solution has many positive qualities, namely:
The criteria mentioned above ensure a high level of trust on the part of the system's users to the cryptocurrency. As a result, a huge number of people are not afraid to invest in bitcoin, as it shows a tendency to constantly increase its value.
How is Bitcoin secured?
Providing bitcoins depends on how popular and in demand it is among users. So, more people who use bitcoins provide more points for accepting its payment and a higher rate.
The Future Of Bitcoin
Today, given the entire history of the past years of cryptocurrency, opinions about the future of bitcoin are significantly divided. We have not forgotten how in 2017 the system enabled many users to earn good money, which was caused by its peak growth. Of course, people who did not have time to take advantage of such generosity were very upset. But it may be too early to despair and give yourself a second chance. After all, no one can know for sure what awaits the cryptocurrency in the future. Experts can only assume and predict. To date, it is known that they are divided in their forecasts. Some are convinced that cryptocurrency is the future of payment means around the world. At the same time, there are experts who believe that bitcoin has lost all chances of becoming a means of payment.
Factors that indicate a positive development of the situation in the context of the Bitcoin cryptocurrency include:
Most experts are convinced that in 2020 – 2024, the cost of bitcoin will rise significantly.
However, we should not lose sight of the skeptical forecasts that are also taking place today. Thus, the disappointing forecasts are justified by the following factors:
Taking into account both sides of the experts, each user of the system and just a person should decide for themselves whether to believe in the future of cryptocurrency or not.
The first thing you need to know: this is a virtual currency and it functions both on computers and on mobile devices. In addition, the bitcoin currency does not have a Central administrator and any management by people. As a result, this results in significant benefits for users.
The creation of the bitcoin payment system was started in 2008 by a programmer under the pseudonym Satoshi Nakamoto. The new currency came to global prominence after 2 years, demonstrating a steady growth trend. The name of the Creator also gave the name to the smallest particle (one ten – millionth share) - Satoshi.
So how does it work? To understand how cryptocurrency works, it is best to compare it with an online Bank, payment system, or real Bank. A transfer in traditional payment systems looks like this:
This leads to a large number of inconveniences for the user: a server malfunction, problems with the Bank's law, or any other issues make both payments and, possibly, withdrawals from the account unavailable. Now let's see what bitcoin is and how the system works.
The electronic currency bitcoin uses a special algorithm (blockchain), which evenly involves every computer running in the system in operations. However, the devices themselves are not connected to each other geographically and may be located in different parts of the world. Each device is also used to store information about current funds, and everything is repeatedly encrypted and duplicated.
Algorithm of payment in bitcoin
If you simplify and write in the style of "bitcoin for dummies", then the sequence of events when sending a payment in cryptocurrency is as follows:
How many are there?
Many people are interested in how many bitcoins there are in the world at the moment. The approximate number is slightly more than 18.3 million (as of April 2020). The system provides for the creation of a new bitcoin by using a special device for computing operations and processing transaction data – mining. But "print", thus, a lot of new currency will not work – the system has a limit on the number of created bitcoins.
There is a maximum allowed number of bitcoins, which is reached by mining (creating new units of currency) it will no longer be possible, and it is 21 million. By simple calculations from current indicators, it is easy to calculate that the increase in the number of virtual coins to the maximum will stretch for 150 years (about 2140), so the questions "how many bitcoins can there be in the world?» and "how many zeros in it?" you can simply not ask yourself.
What is bitcoin and what is its practical value for the end user? There is no even theoretical possibility to produce such a quantity of cryptocurrency that it will lead to a drop in its price for a long time. A striking example: the us dollar has fallen more than 300 times over the past 100 years due to the appearance of new and new money. However, only one structure had control over their release. As a result, millions of people's investments and savings could and can become worthless at any moment. In fact, this statement works for every classic currency and payment system.
There are a huge number of differences between cryptocurrency and conventional money. Therefore, it is difficult for many to understand why bitcoin is needed. Let's try to figure it out:
A few more differences
And yet, what to do with bitcoins? There are many options both for fans of earnings and investors, and suitable for less risky users who do not know what bitcoins are and why they are needed:
The best answer to the question of what bitcoins are needed for. If we analyze the behavior of the currency's price against the dollar, the absolute maximum was in December 2017 — $ 20,000. Virtual money bitcoin, the rate of which exceeds 7,000 dollars for 1 bitcoin (April 2020), periodically breaks records of value. In addition, all trends suggest that the demand for cryptocurrency will grow very quickly and in 2 years they will displace international payments from the market.
Given the limit on the amount of currency in the system (21 million), with the growth of demand, electronic money bitcoin will inevitably increase in price. Another thing is that the security requirements for your computer are increasing significantly. Because all transfers in the system can not be canceled. In fact, it is the original restriction that bitcoin is provided with. There is no likelihood of your deposits being devalued in the long term. You should think about how to store them now.
2. Make international payments
In the environment of freelancers and remote employees, bitcoin payments have become commonplace. It's cheap, reliable, and anonymous, which is what he's always been known for. The principle of operation of which is based on decentralization and powerful encryption. In addition, this is a very simple process: even those who do not know what electronic money bitcoin is, will be able to understand in two minutes.
3. Pay for services with bitcoins
At the moment, you can pay with bitcoin with Dell, Microsoft and Amazon. Not to mention hundreds of smaller stores and services. In the European Union, South and North America, as well as in the far East, they can easily pay for food, clothing and other small goods. Bitcoins are in great demand in the world.
4. Gambling, sports betting
Play gambling games, make sports bets, use them for trading on stock exchanges, even if they simply do not exist in your country. Here everything is limited only by the imagination of developers of various projects and the possibilities of cryptocurrency. After all, what is bitcoin in simple words? Ability to spend money anonymously and quickly.
Disadvantages of bitcoin
Although bitcoin has many advantages, the currency also has a lot of disadvantages and it is worth considering them in the process of Dating:
Now we have sorted out the question of bitcoin that it is an interesting alternative to money that has the right to exist. Yes, the currency has a number of disadvantages, but they are fully offset by a huge list of advantages and an ever-growing demand for cryptocurrencies. Over time, its value and importance in the world will only increase.
In fact, bitcoin is an ordinary computer program. Only it is not located on a single computer or server, but on millions of computers that communicate directly with each other through this program.
Torrents work in a similar way. You install a program, and someone else does the same. After that, you can transfer files directly to each other, without any servers involved, and with little or no control. This feature has made torrents the main hotbed of piracy on the Internet.
So the bitcoin system works exactly the same way. Only the task of this program is not to transfer files between users, but to give them "virtual points".
Where do bitcoins come from?
Would you keep an extra program on your computer that doesn't give you anything? Unlikely. Therefore, the program "encourages" those users who keep the entire system on their computers. It encourages them by issuing virtual "points" (or points), which are called bitcoins.
In other words, this is an interesting phenomenon. The program doesn't do anything useful. It "lies" on users ' computers and gives them virtual money for the fact that it is there. At the same time, the program gives out its points for a reason.
The entire system has a restriction. It can give out only 21 million virtual points (bitcoins), and none more. At the same time, more and more users are connected to the program every day. And do you know what single action this system is programmed for? It makes it harder to get bitcoins if there are too many users. Or Vice versa, it makes it easier if there are suddenly fewer of them.
What are bitcoins issued for?
People who support the system through their computers are called "miners". And the entire process of "mining" bitcoins — "mining". The entire mining process boils down to the following: the program creates tasks that the miner's computer must calculate, and for this it is given virtual money.
This is a conditional example, of course. Tasks there are much more complex, and even the computer has to spend time and power of the processor and graphics card to solve them. And these tasks are becoming more and more difficult, because there are more and more miners.
Accordingly, it regulates itself, and makes sure that the tasks are quite complex. And miners, on the other hand, collect more and more powerful machines in order to be the first to solve the problem and get bitcoin, ahead of other miners. They affectionately call their problem-solving machines " farms."
That's how it turns out to be a race for your own tail. Miners are connecting more and more powerful computers to the system so that they can count faster. And the system comes up with more and more complex tasks.
That, in fact, is all that the Bitcoin system represents. On the one hand, it is a simple code that comes up with mathematical problems. On the other hand, there are "miners" who solve these problems and get virtual bitcoin points for it.
But the most interesting thing is that these "miners" then sell their virtual coins on electronic exchanges for quite real money. And they buy it! For a moment, the cost of these "virtual coins" has already exceeded the cost of gold. How did this happen?
Why is bitcoin worth more than gold?
The price of any product or service in the world depends only on two factors — supply and demand. If the price increases, then the supply does not keep up with the demand. That is, there are many more people who want to buy bitcoins than there are bitcoins.
In other words, to answer the question why these virtual, fake coins are so expensive, we need to answer two questions:
By the way, we have already dealt with the offer above. The system cannot give out more than 21 million coins in total. This is actually a brilliant solution. If bitcoins were issued without restrictions, they would never reach this value.
Much more interesting is the situation with demand. Why more and more people want to buy these bitcoins even for crazy money. Get ready, it's going to be hot.
Why do people buy all bitcoins?
I will say right away that the demand for bitcoins is actually not that big. That is, of the total number of people on Earth, only a very small percentage buys, stores and resells these bitcoins. But in relation to the meager supply — Yes, the demand is simply gigantic. Therefore, the price is huge. And the demand is so high for three reasons. And you won't like any of them.
Reason #1 - Beautiful legend
Every program has a Creator, a living person, made of flesh and blood, with its own sins and shortcomings. But the Bitcoin system does not have it. More precisely, it is, of course, there, but no one knows exactly who it is. There is only the mythical "Satoshi Nakamoto", who in 2008 first launched the system. But no one knows who it is, whether it is a person or a group of people, or a huge Corporation. Accordingly, this mystery gives the entire system a very attractive entourage. Judge for yourself.
The legend of Satoshi
There is a very cruel and unfair world around us. Normal boys (such as you and I) have to work every day to feed themselves. While bankers, financial magnates, owners of currency funds, fatten simply by the fact that they have a tap to issue money.
They control everything, and they rip off every one of us. They also control all our money, and we are completely dependent on them. They said-pay 25% for the loan, we will pay. They said that a dollar today will cost 70 rubles — and there is nothing we can do about it. And here in this terrible world comes the chosen One. He rebelled against the system. He taught people to make their own money, bypassing all these financial bloodsuckers.
There is no single control center for bitcoins — so no one can take them away from you. Money now belongs to people, not to the top ten richest families in the world. This is a new financial and economic system that will free people from the constant "running in the wheel", and make them free and happy.
And no one knows the true name of the Chosen one. No one knows what it looks like. He does this not for his popularity and his own good, but for the sake of Humanity. He's like Neo fighting against the Matrix for our happiness. That's such a beautiful idea. I don't know about you, but it probably gives the miners the creeps. They see themselves as the future rulers of this new economy.
Imagine nerd programmers who spent all of high school with their heads in the toilet. Now imagine that they are offered a new system of world control, where they are the stars of the first magnitude. They'll make sure that's the case.
Such a beautiful legend increases the motivation of miners, and makes bitcoin ideas popular "among the people" (even if no one there understands what it is). But there is a second, even more prosaic reason.
Reason #2 - get rich Fast
What do you think happens to a product whose price is rising rapidly and that can be quickly resold at a higher price? That's right, more and more people want to buy it and then sell it for more. That is, the true value of the product does not play any role here. It all depends solely on how many new people are willing to outbid, then resell more expensive. This increase in prices is called a financial bubble.
Financial bubbles have always appeared, and at all times. As early as 1636, there was a so-called "Tulip mania" or "Tulip fever". There, prices for Tulip bulbs grew even faster than today for bitcoins. And also just because a lot of people wanted to buy them not in order to get the benefit of their purchase (to grow for their own enjoyment or eat), but in order to resell them for more the next day.
There is a limit above which people will not pay for either Tulip bulbs or bitcoins. At some point, some part of the currency holders will decide that the price is already high enough — and it is necessary to sell. But there are no buyers. As is always the case. Then they will lower the price a little to buy. Then a little more. And as a result, the financial bubble will burst in an instant.
Reason #3 - Network marketing
How did you even know about the existence of bitcoins? Most likely, one of your "friends" in social networks posted a post that there is such a cool thing — a new world currency. And that he has already bought, and now you can become immeasurably rich by clicking on his link and buying a whole bitcoin or part of it.
Network operators immediately liked the idea of distributing bitcoins for Commission fees. You don't need to deliver anything, meet anyone, or "recruit"anyone. Just spread the information that bitcoin is already more expensive than gold, and that this is just the beginning — and that's it. Human greed for easy money will do the rest for them. Accordingly, the information that bitcoins are the future of the whole world is very quickly spread through thousands and thousands of willing people.
For these three reasons, the demand for bitcoins is so huge. On the one hand-a beautiful legend that inspires miners to feats. On the other hand, greed and the desire to "snatch" and earn money without doing anything. Add in a very limited offer and word-of-mouth distribution of ideas by networkers, and you get "virtual coins" at a price higher than real gold.
Bitcoin is the world's first decentralized digital cryptocurrency. The Bitcoin network appeared in 2009, it works by mining as a result of which BTC coins are extracted. Transactions in the BTC network occur on the peer-to-peer principle, which means direct transfer of funds from one user to another, without the participation of third parties and regulatory authorities in the form of banks, the state, etc.
The bitcoin cryptocurrency operates on blockchain technology, which fundamentally distinguishes It from all previously created electronic currencies and payment systems. The Bitcoin (BTC) blockchain is not tied to any physical assets or "official" Fiat currencies, and the price of a digital coin is regulated solely by market demand and supply, i.e. by what value people themselves invest in it, similar to gold.
Bitcoin has another big similarity with gold — limited stock and total quantity. In the case of bitcoin, its number is strictly limited to 21,000,000, while in 2020, 18,300,000 BTC has already been extracted, i.e. more than 85%. And this figure does not take into account all lost wallets with bitcoins lying on them, and this used to happen often because users negligently approached the correct storage of cryptocurrency on bitcoin wallets due to the fact that the value of coins at that time was not significant.
Thus, Bitcoin is a worldwide payment system without emission and inflation, through which you can conduct transactions with this currency. Its main difference from traditional payment systems is that the Bitcoin network does not have any management and processing center - all operations take place exclusively in a network of equal customers without intermediaries.
About bitcoin in simple words
In simple words, bitcoin is one large file-registry (for analogy, you can imagine Exel) where information about all payments and receipts is recorded, while this file can not be forged or changed, and the value of the cryptocurrency is constantly increasing due to its limited number and the lack of additional emission.
Bitcoin is the very first cryptocurrency that appeared in 2009. For the first time, the principle of operation of the bitcoin peer-to-peer network, which Satoshi Nakamoto worked on, was available for two years before the advent of the digital currency. Despite the fact that Nakamoto managed to attract the attention of thousands of programmers to his project, no one believed in its success at that time.
The first transaction using bitcoin was made by an American, Hane Laszlo, who offered 10,000 BTC to anyone who brought two Italian pizzas to his house. It is difficult to imagine what emotions Laszlo experienced at the moment when the bitcoin exchange rate began to grow rapidly.
Today, there are hundreds of millions of transactions using cryptocurrency. Therefore, the question "what is bitcoin" is answered in simple words-money that has its own rate in relation to another currency, but does not have a physical form.
Distinctive features of BTC as a cryptocurrency
There are several ways to purchase bitcoins. However, the process can be fraught with some difficulties. For example, there are a large number of fraudulent sites that list fake coins of other blockchains (Bitcoin Cash, Bitcoin Gold, etc.).
There are almost no free ways to get bitcoins. After the rapid growth of the cryptocurrency exchange rate, such services for obtaining free electronic coins ceased to exist or switched to a different mode of operation. To get a cryptocurrency by any method, you need to spend certain resources.
Main ways to get bitcoins:
With the technology more or less clear, let's go to the principles that were laid down in bitcoin:
Bitcoin is the very first cryptocurrency that appeared in 2009. For the first time, the principle of operation of the bitcoin peer-to-peer network, which was worked on by a certain Satoshi Nakamoto, could be found two years before the appearance of the digital currency.
A decentralized currency that is not controlled by any Bank or exchanger has always been a nightmare of the global financial system. It is scattered around the globe, works only online, is not provided with anything, and every user in the world is able to influence the course without leaving the computer. This increases the server's computing function, which may look like a continuous operation in the system. Electronic cryptocurrency has a number of striking differences from the usual money and other valuable financial assets.
Bitcoin has the following differences:
Bitcoin in simple words, can be described as follows: mathematical calculations generate the mining process in a small part of computer code. Today, there are hundreds of millions of transactions using cryptocurrency. Therefore, the question "what is bitcoin" is answered in simple words-money that has its own rate in relation to another currency, but does not have a physical form.
Unlike government currency, the cryptocurrency cannot be printed. However, this does not mean that virtual coins appear out of nowhere. Cryptocurrency is a digital object containing a huge amount of information that has a cryptographic code. Simply put, it is a kind of virtual memory card that has a digital record.
In order to generate a new record, you need to find the only correct solution to a complex mathematical algorithm. Since even the most intelligent person is not able to cope with such a task, computer computing power is used for this purpose.
If you happen to ask these investors why bitcoins are needed, most likely, you will only see confused looks and raised eyebrows. Gold, for example, is used in mints, jewelry, as a conductor for high-precision electronics, and as a material for medical implants.
The situation is somewhat more complicated with determining the range of asset usage. If bitcoin is a true commodity, its value should not consist only of the value of the investment instrument. So, what is this asset used for?
As an alternative payment method
If you spend enough time online, you may have noticed a growing number of projects accepting bitcoin as a means of payment. Some companies only accept bitcoin. Why? Sometimes entrepreneurs do something that contradicts the principles of traditional financial institutions, such as providing VPN traffic, selling marijuana, or showing adult videos. Since bitcoin uses a p2p system, such services can not be afraid of blocking their accounts? and their users will remain anonymous. In General, bitcoin has become quite popular. It is accepted by more than 100,000 sellers online and offline, and their number is growing every day.
As an alternative to a debit card
Bitcoin provides opportunities similar to banking services. In some regions, people already have access to bitcoin ATMs where they can withdraw funds from their wallet or add funds to it. These cards can become an alternative to debit Bank cards. There is even a tangible bitcoin coin, but it is more of an expensive souvenir than a real value, since it can only contain the seed phrase needed to activate a real wallet.
As a permanent transaction register
In January 2009, when Satoshi Nakamoto mined the Genesis block of bitcoin, he left the following entry in it:
"The Times of January 3, 2009: the Chancellor is on the verge of another Bank bailout."
This reference to the modern banking system reflects one of the main elements of bitcoin. The blockchain records all transactions of this cryptocurrency. More importantly, due to the fact that third-party data can be entered into the records, the bitcoin network can be used to exchange information and values that are not related to it. This mechanism is much better implemented by altcoins like Ethereum (ETH), but it was bitcoin that first proposed such a concept.
Instead of a Fiat currency
Bitcoin is a ready-made solution for those who do not want or can not use the Fiat currency, who have lost faith in Central banks, live in a country with a degraded economy or in a region where there is no stable currency. If you omit the recent ultra-volatility of the exchange rate, at the moment the asset is a good investment and a healthy alternative to the Fiat currency. Of course, no one knows what the future holds for bitcoin. However, the use cases described above are valid for the time being and are likely to be valid for some time to come.
Main technical characteristics and features
Bitcoin is a unit of information, a certain piece of computer code expressed in mathematical calculations of computer power. The peculiarity of bitcoin is that it is an independent digital unit, which is not affected by other currencies and payment systems, the economy of this network is completely independent.
Technical characteristics of the Bitcoin blockchain:
The development and commissioning of the cryptocurrency is conducted with open source code. This means that most users can make changes to the structure of bitcoin. In addition, the open source code allows any user of a personal computer to start mining electronic money. This approach to development instantly eliminates errors in the system, helps to rapidly develop the exchange's network and mine the # 1 cryptocurrency.
The blockchain technology
A chain of blocks containing information and built according to a certain scheme is called a blockchain. This chain of blocks grows and performs the function of distribution, classification of the database. It is necessary for conducting transactions and exchange operations with the Bitcoin cryptocurrency. Blocks are formed at the same time by a set of" miners", after which they go to a special database (blockchain). The blocks contain all the information about the transaction, holders of the cryptocurrency. The number of transactions does not affect the speed of forming block branches.
Secure transactions with electronic signatures
Electronic signature – what it is in simple clear words: a password assigned to a new account. When registering in the Bitcoin network, all users are given unique signature keys. Only with their help it is possible to carry out the transaction from your account. In addition, you can create a shared account for several people with a multi-signature. To transfer currency from it, you will need to enter the personal IDs of at least two-thirds of the account holders.
Bitcoin consists of Satoshi
1 Bitcoin is 100 million Satoshi. You can send any amount to Satoshi, which makes the cryptocurrency very flexible for use in everyday life.
Halving bitcoin-reducing the reward of miners
Halving is the process of dividing the number of generated mining block rewards by half. It is necessary for the network to work because it is necessary to maintain the total number of bitcoins, which will never exceed 21 million. The day when the amount of reward to miners for the block is divided in half, is called "Halving".
When will the next BTC halving take place?
Halving of bitcoin is planned by block number, not by date. Halving occurs every 210,000 blocks and reduces the reward by 50% each time exponentially. The 2020 halving will occur on the 630,000 block. The next expected date for reducing the remuneration for each block created in the bitcoin network is may 24, 2020 (give or take a few days). Starting from this day, 6.25 bitcoins will be provided for each block instead of the current 12.5 bitcoins.
How does halving affect the price of cryptocurrency?
Before the first halving, which occurred in November 2012, the price of bitcoin was 2.55 dollars. A year after this event, it rose to $ 1,037. Curiously, after that, the cryptocurrency fell in price almost four times, to 268 dollars. However, the second halving, which occurred in July 2016, allowed not only to return to 1037 dollars, but to overcome this level by 2.5 times: bitcoin eventually rose in price to 2525 dollars — in July 2017.
How the price of bitcoin will behave in 2020, and when it will grow — this is still an open question. The key point is to maintain the growth of demand for this cryptocurrency, but the real volume of purchase and sale of bitcoin, oddly enough, is not so easy to track. Meanwhile, it is bitcoin and its halving law that inspire a certain optimism: yet, in its more than 10-year history, the blockchain of the first cryptocurrency was not subject to hackers.
In the end, we will answer all the most popular questions about the Bitcoin cryptocurrency.
How many BTC are there in the world?
A currency that is not backed up by traditional resources and is capable of reproducing itself by running certain programs on the computers of network users will instantly become worthless. To prevent this, an artificial restriction has been created that prevents the number of bitcoins in the world from becoming more than 21 million.
All these millions are computer-backed financial transactions on the network. At the moment, 18.33 million coins have been mined. Due to the constant complexity of the mining algorithm, the issue of the last bitcoin is expected in 2140.
How does cryptocurrency appear?
Cryptocurrency appears through the efforts of users who use it, allocating computing power to process all transactions. Bitcoin mining – what is it in simple reasonable words, how does an electronic cryptocurrency appear?
Bitcoin does not have a transaction processing center, so the task of providing computing processes is taken over by users. For spending the resource of their computer, they receive a strictly defined amount of bitcoins.
Who deals with the emission of bitcoins?
The issue of bitcoin is clearly limited, limited, and you can only interfere in this process by renting the computing power of your computer to the system. People who do this are called manners, and for their services they receive a limited amount of Bitcoin issued daily.
This type of activity is currently beneficial only to owners of large firms and members of large pools. Smaller farms are already struggling to cope with the tasks provided to them by the Bitcoin system.
How is the Bitcoin cryptocurrency secured?
Bitcoin – what it is in simple words, can be described as a sophisticated version of the nascent economy of the country with undeveloped gold mining. An unearthed resource is worth nothing but a person's promise to buy it in the future.
The use of cryptocurrency is based on the same principle: it appears due to demand, which generates itself. The cost of bitcoin is determined by people's trust in the system, their willingness to conduct transactions using it, which causes a financial pyramid or bubble, and this is a negative feature of Bitcoin.
The role of Bitcoin in the economy now and in the near future
In today's market, bitcoin has attracted a lot of interest from investors, and there is a lot of trading using bitcoin on the Internet, because when accepting cryptocurrency as payment, the seller is confident that he can exchange it for other goods in the future.
If earlier the cryptocurrency was a local payment method and was used by a limited number of people, now it is present on the Internet as an official means of monetary circulation. There are cases when BTC tokens were issued for wages, but at the moment they can be paid in restaurants, hotels, stores in many countries of the world.
In circulation on the territory of Western States, cryptocurrencies occupy a strong place, but they have also gained popularity due to illegal actions in the space of the "deep" Internet, where it is used as the main unit of account.
There are many opportunities for speculative activity with the help of cryptocurrency, since its colossal distribution and naturally increasing exchange rate allows you to determine the benefits of implementation in a specific period of time.
The modern financial system is considered inefficient and unfair, so Bitcoin implies an alternative to It. In fact, it is an opportunity to produce, use and store money on a par with other participants in the shared network. Nevertheless, during its history, bitcoin has repeatedly suffered falls, but its exchange rate is also maintained by the cost of electricity from mining installations, so it will be stable in the near future.
It is also important to note that Bitcoin is a decentralized currency, meaning It is not subject to government control. It is formed and regulated by the actions of users themselves within the network, which ensures its reliability. All transactions from the network are made without intermediaries, so there are no additional costs for transferring funds.