What is Bitcoin?
As the internet became popular and a lot of business shifted online, a need for a fast, safe and secure digital cash system was observed by researchers. To fulfil the needs, a lot of attempts were made and finally in the year 2009, Bitcoin was released. An anonymous developer Satoshi Nakamoto released the source code on the internet. Bitcoins are generated as a reward for mining and could be traded or exchanged for products or services.
In this Bitcoin guide, we will cover what Bitcoin is, what are its benefits and everything related to Bitcoin to enable you to get started with the use of this innovation!
What is Bitcoin?
So what actually Bitcoin is? Well, “Bitcoin” could be classified into two components.
On one hand Bitcoin – the digital cash or coin, that basically exists in the form of a snippet of code with the signed authority of you being the owner. When we say that someone has one Bitcoin, we are basically referring to a person having digital ownership of one Bitcoin whose worth is its value at that time.
When we are referring Bitcoin, we might be discussing the Bitcoin Protocol, i.e. the overall protocol designed to run the Bitcoin transaction operations and maintain the ledger. The system is decentralized with no central authority involved.
What determines the value of Bitcoin?
Bitcoin is one of the most valuable assets in the online world. It is amazing to see how an online currency that doesn’t even exist physically was once valued at nearly 20,000 USD.
First of all, we must know that Bitcoin and cryptocurrencies are volatile in nature, i.e. their value could change within days or even hours. It is difficult to predict the future value of them unless you are a crypto trader-expert. We are actually quite fans of Crypto Crew University, a free and educational YouTube Channel, but of course, feel free to follow any channel you think is worth following and if you like, share it with the community!
When it comes to factors that affect the value of Bitcoin, the basic feature that makes Bitcoin valuable is the concept of supply and demand. The system is smartly designed where supply is decreasing over time, and the demand is increasing. The events like Bitcoin Halving have shown how the price is affected when the reward value is decreased.
What Makes Bitcoin Unique and Revolutionary?
If we look into the past few decades Bitcoin is surely one of the top inventions that could have a big impact on the future of digital cash systems. There are certain features that make Bitcoin unique and different from traditional cash systems.
>> Take a look also at our infographic about Bitcoin statistics and facts.
The current traditional cash system is a centralized one, where a central authority such as the government or bank controls the cash system. The value is controlled by them that could be changed as per the economic conditions or other factors.
Bitcoin is designed on a completely decentralized system, i.e. there is no central authority controlling this system. So, now the question is if there is no central authority then who controls the system and how it works?
The answer to this question is the systems that are connected to the Bitcoin network are responsible for running the complete Bitcoin system. The computational power required by the Bitcoin protocol is supported by the systems participating in the system.
The concept of decentralization is one of the most attractive features of Bitcoin. Decentralization makes sure that the system is controlled by no-one but everyone.
Limited Supply of Bitcoin
The basic concept of supply and demand is one of the core features that states the value of goods or services. Traditional currencies like Dollars, they are printed by the governments that decide how much currency is to be printed.
Meanwhile, when it comes to Bitcoin it has a limited supply of 21 million. When this number is reached, there will be no new generation of Bitcoins, and only Bitcoins that will be left will be one that are already generated by the system. This limited supply could make Bitcoin much more valuable in the future. The demand would increase as the supply decreases, ultimately resulting in Bitcoin being one of the valuable assets for investors.
Bitcoin is not completely anonymous when it comes to the identification of transactions being made. When a transaction is made using traditional banks, the transaction is accompanied by the details of both sender and the receiver. These details could include name, account number, etc.
When it comes to Bitcoin transactions, it comes under the category of Pseudonymity, as there is no identification such as name but the transactions are made based on the wallet address that is unique to the user making the transaction.
Before making any transactions, the necessary security checks are usually done by exchanges. After proper verification, these exchanges allow the user to make transactions. Furthermore, the transactions made on the system are visible to the participants and could be tracked.
Immutability of Bitcoin is something that has both positive and negative sides. Once a transaction is made on the Bitcoin network, it cannot be reversed. This is obvious because there is no intermediary authority that could judge if the transaction is eligible to be reversed or not. The positive side of this, however, that this makes Bitcoin transactions prone to tampering.
Bitcoin could be divided into the smallest number, such as one hundred millionths of a Bitcoin (0.00000001). These small units of Bitcoin are known as Satoshi.
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