What Is Bitcoin?
Bitcoin is a digital currency, and each unit exists as a specific line of code. Bitcoin is also a distributed ledger system that supports payments between users without the need for a central authority like a bank. The term Bitcoin refers to both the token and the online platform or blockchain that confirms and stores transactions. In many ways, a digital currency resembles traditional money. Cryptocurrency differs from traditional money because it depends on a verification using cryptography.
Bitcoin is not a government issued currency like traditional money. It is not a precious metal or some rare natural commodity. Bitcoin is a cryptocurrency and it must exist in a secure digital record. The system that supports Bitcoin is a blockchain or decentralized distributed ledger. The blockchain has the remarkable features of decentralization- there is no central bank or outside authority.
The Impact of Bitcoin
Bitcoin was invented in about 2008 and went on the market in early 2009. The currency has experienced breathtaking rises and abrupt fall. The overall trend has been an impressive rise in value from its inception to the present time. There were cryptocurrencies before Bitcoin, and groups and individuals have created many since. Bitcoin remains the most identifiable brand of cryptocurrency.
As cryptocurrencies continue to gain support among mainstream financial systems, Bitcoin is a leading issue. Bitcoin demonstrates the use of cryptocurrency as an asset, a currency, and an investment. Today, Bitcoin has spread into everyday life and commerce. People can buy Bitcoin at ATM,s, Cryptocurrency Exchanges, and online through some major banks and credit card companies. Owners can convert Bitcoin to other cryptocurrencies and to cash.
Who Invented Bitcoin?
The concept and development was an open source project involving a large number of contributors. Historians give credit for the initial concept to a developer pseudonym Satoshi Nakamoto. The initial concept sought to create a secure, verifiable payment system independent of central authority supported by electronic transfer.
Many have claimed to know the identity of Satoshi Nakamoto. The name is most likely a pseudonym. It appears that this is either not a real person or that the real person may never be known.
Bitcoin and Traditional Money
Like traditional money (dollars, Euros, Yen), Bitcoin can pay for things through electronic transactions. Like traditional currency, people can buy or sell Bitcoin electronically. The differences between Bitcoin and traditional currencies are significant and provide new ways to use and grow wealth.
Bitcoin is a decentralized system. The system has not central authority in charge. The blockchain has a group of volunteers that oversee the coding and the transactions run through an open network of dedicated computers located around the world.
Bitcoin has a limited supply. Governments issue traditional money through banking systems. The government and banks then control the money supply. Traditional currency users have little choice or control over the relative value of their money. Bitcoin has a limited supply and as miners produce new coins, they receive a small payment. With a limited supply, Bitcoin holders benefit from increased demand as their holdings rise in value.
Bitcoin transactions cannot be changed. Once recorded in the network blockchain, a transaction is permanent and cannot be changed. This feature is a strength to those seeking certainty. It may pose a risk to those accustomed to having a central authority that can reverse, stop, or cancel a transaction.
Bitcoin depends on efficient operation of the system for creating units, recording, and verifying data. A blockchain consists of blocks of information created in a formal process of signing, sealing, and recording. Bitcoin uses a proof of work process to select the persons that create and close each block.
Mining is a competition that involves solving a mathematical computation. The process requires expenses related to equipment and electricity usage. Mining has incentives for good performance and safeguards against misconduct and errors.
In summary, Bitcoin is both a currency and a platform for supporting safe and secure digital currency ownership. Bitcoin as a currency was intended to be a utility; the original plan was to create a payment system that did not require the role of a central authority. The use of Bitcoin as a payment system has expanded with some large global firms like Microsoft deciding accept Bitcoin and a few other leading cryptocurrencies.
Bitcoin has had an impact on cryptocurrency and alternative payment systems. The currency has wide acceptance and a place in national and international finance. Chicago Mercantile Exchange owner, CME Group, offers a Bitcoin Futures instrument for traders and investors. Further, many hedge funds now offer Bitcoin options, and the number of users swelled to more than 10 million at the end of 2017.