Bitcoin (BTC for short) is a digital currency created and stored electronically. Unlike the euro or the dollar, bitcoins are not printed physically or generated by central banks, but many people around the world calculate them remotely with computer power. Bitcoin, like other digital currencies, is not subject to any central or state control.
Bitcoin is the best-known example of a fast-growing cryptocurrency. The following tutorial explains the most important features and characteristics of the digital currency.
What is Bitcoin and how does Bitcoin differ from other digital currencies?
Bitcoin can be used to buy goods and services, as well as to conduct transactions in the financial market. Bitcoin fulfills the same functions as conventional currencies, the euro or the US dollar.
The most important feature of Bitcoin, however, is its decentralization. The Bitcoin network is not subject to any institutional control. This means that no central bank or state can control the supply of money and establish the framework: the network controls itself.
Who created Bitcoin?
A software developer with the pseudonym of Satoshi Nakamoto has supposedly created Bitcoin. However, it is not yet clear whether it is a single person or a group. The unresolved identity of Satoshi Nakamoto, therefore, leaves room for speculation and conspiracy theories.
How many Bitcoins are there?
The Bitcoin protocol was developed for a maximum of 21 million extracted bitcoins (see Bitcoin mining). These coins can be divided into smaller parts (the smallest part is one hundred million) and are called Satoshi, which is named after the inventor of Bitcoin Satoshi Nakamoto.
What is Bitcoin based on?
Bitcoin is based solely on mathematics. There is no institutional fabric behind Bitcoin that represents its intrinsic value. People all over the world use software that follows a mathematical formula to generate bitcoins (also called mining).
The software is open source software, which means that it is possible for anyone to understand what exactly this software does and if it fulfills its function. The underlying Bitcoin technology, known as Blockchain, is currently receiving a lot of interest from many companies, institutions and governments, as well as Bitcoin. The decisions in the Bitcoin network are made by the network through a consensus mechanism defined in the program code, instead of in a single instance.
What are the key features of Bitcoin?
1. Bitcoin is decentralized
The network is not controlled by any central institution. Every computer that calculates and transfers bitcoins is part of the network. This means that no central institution can make monetary policy decisions for the Bitcoin network, or even have the power to remove bitcoins from users. If the system is disconnected for any reason, the bitcoins will be preserved. The complete protocol of the Bitcoin network can be stored theoretically on a hard disk or even printed on paper.
2. Bitcoin is easy to manage
Opening a bank account or business account is often associated with bureaucratic obstacles. A Bitcoin account (Wallet), however, anyone can open without having to provide any evidence.
3. Bitcoin is pseudo anonymous
Users can have multiple BTC accounts (Wallets). No names, residential addresses or other personal information are assigned to them.
4. Bitcoin payments are 100% transparent
The network stores each transaction in the blockchain. The blockchain resembles a large register. If someone has a public BTC address, everyone can see how many Bitcoins are in this account. However, it is not possible to see who owns this BTC address. However, many users used changing addresses and only transferred portions of Bitcoins to one address.
5. Transaction costs are low
An international bank transfer to a conventional bank quickly costs a large amount of money. In Bitcoin, it does not matter if the recipient of the transfer is one kilometer away or several thousand kilometers.
6. Bitcoin is fast (peer-to-peer)
Bitcoin can be sent anywhere and the network only takes a few minutes to confirm the payment. A Bitcoin transfer is carried out as equals, that is, no intermediary or intermediary intervenes. Unlike bank transfers, the transaction is carried out directly and without deviations from A to B.
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