Challenges in definitions and lack of transparency in the financial system have led to the creation of fictional stories about the digital currency Bitcoin. Newspapers, magazines, and the internet are filled with headlines about cryptocurrency. Rumors have pushed the currency to a point where distrust is born. Note that Bitcoin is compared to the MMM pyramid and is forecasted to collapse soon. Every person dealing with cryptocurrency should know what Bitcoin is and why it is needed.
About the currency
Valuable goods, electronic and cash money – a list of currencies in circulation among the population of the planet Earth. Gold, oil, gas, pearls, coffee – a list of valuable goods traded between countries. To simplify exchange, electronic and physical money have been introduced. Bitcoin is a representative of electronic finance. Such money as equivalents stored on VISA or Mastercard cards in the currency chosen by the owner.
What is Bitcoin and Why Is It Needed
Compared to other electronic money, Bitcoin is a decentralized currency. That is, it is not tied to any bank or country’s economy. The advantage of Bitcoin is that no government on the planet has the right to regulate the value of digital currency and collect fees from transactions. This property of Bitcoin causes the International Monetary Fund to implement “swing” policies for cryptocurrency owners. Banks do not earn from financial operations and incur losses, missing out on potential depositors or borrowers.
Cryptocurrency only has an exchange rate that sets its value based on supply and demand.
Security and anonymity
It is impossible to hack a Bitcoin wallet. The exception is careless actions by the owner, allowing malicious actors access to their computer. The absence of two-factor authentication and neglect of security have left hundreds of users vulnerable.
Transactions between wallets occur without bank participation. Again, the built financial structure over a century turned out to be dividend-free. It is impossible for outsiders to track Bitcoin transactions. Even if an attacker intercepts a packet, they cannot decrypt the data due to encryption.
Cryptocurrency is attributed with anonymity. Media reports suggest it is impossible to find the wallet owner. However, there is a caveat. To withdraw money via an exchange, the owner provides a bank account number. Under government pressure, the bank will disclose the cardholder’s information, and the exchange (which operates under official documents) will provide transaction details. But IT experts assert that matching a Bitcoin account with an owner is impossible, as exchanges create one-time accounts for transfers, processed on the Blockchain server side.
History of Bitcoin creation
After the hype in the digital currency market, hundreds of online publications began discussing who the creator of the cryptocurrency is. Fame is attributed to programmer Satoshi Nakamoto. However, finding a person with that name proved difficult. Experts suggest that the creator hides behind a pseudonym to protect their family from reporters and international banks.
The creation of an uncontrolled and anonymous currency is attributed to American intelligence agencies. The motive is to financially support coups worldwide. The idea seems crazy, but it is widely discussed in Russian-speaking and Far Eastern countries, where the USA is seen as an aggressor.
How it works
Once you understand what Bitcoin is and why it is needed, you may be interested in how the cryptocurrency works. Bitcoin is a reward for blockchain operations. And blockchain is a chain of blocks for financial transactions. Imagine books. To turn the page, you need to read the text. Without finishing reading the book, you cannot start a new one. As you read books, information is stored in your memory. Similarly, the blockchain records transactions and at the end forms one block. To close the block, a digital signature must be selected. This is calculated by processors of graphics cards of millions of users.
How to get and use Bitcoin
Two options – earn and buy.
Earning, or mining, is performed by high-performance devices that connect to pools and participate in selecting digital signatures for blocks. You can buy Bitcoin on exchanges. To store it, you will need a wallet.
Using Bitcoin implies financial enrichment. Miners sell cryptocurrency to “recoup” expensive equipment and spend money profitably. Consumers buy and sell Bitcoin at favorable rates to profit from the difference.
In conclusion
It is impossible to know everything about Bitcoin. No one knows how the cryptocurrency saga will end. But as long as the blockchain exists, threats leading to the collapse of electronic money are absent. It is known that the complexity of calculations increases, and the last block is approximately expected to end in 2140. The forecast was made in December 2017 and is still not precise. The increased demand for cryptocurrency has prompted miners to intensify Bitcoin extraction.
Regarding the value of electronic currency, it is also a lottery. The price is influenced by speculators trading other cryptocurrencies linked to Bitcoin. For 2018, positive growth dynamics for BTC are planned, but what happens next is unknown.
