In the past few years media has been all about bitcoin. From social media to news broadcasts and even government legislation, not a single day has passed without something bitcoin-related being in the spotlight but what is bitcoin? The importance of emergence of bitcoin is often compared even to the emergence of the Internet. But oddly, most of us just nod along still without fully understanding what is bitcoin in actual. So, to cut through some of the confusion we’ll explain the phenomenon of what is bitcoin as easy as it could get.
What does bitcoin mean?
Even people closely related to “cryptocurrency world” often struggle with this simple question. As stated in original white paper, the document where the creator of bitcoin explains the system to the public, bitcoin is “a purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution.” That makes bitcoin the world’s first crypto currency, a digital asset invented that was designed to work as a currency. So in conclusion if you are asking what is bitcoin, simply put – a form of electronic cash.
Bitcoin is often called “the original cryptocurrency” and is the largest and most popular blockchain network in the world. It is the first decentralized digital currency, which means that it was designed to work without an administrator, which in this case is central bank or payment gateway. It can be easily sent from user to user on the peer-to-peer bitcoin network directly, without the need for intermediaries. Also, with bitcoin, it becomes much harder to trace transactions and ascertain the identities of the participants. Central banks and other financial institutions seem to have no control over its operations.
Bitcoin is often compared to gold, due to the phenomenal similarities. Just like gold, bitcoin cannot simply be created arbitrarily. Gold must be mined out of the ground, and bitcoin must be mined via computing power. Linked with this process is the stipulation set forth by the founders of bitcoin that, like gold, it have a limited and finite supply. In fact, there are only 21 million bitcoins that can be mined in existence.
Where did bitcoin came from?
“The legend has it” that Bitcoin was created by lonesome genius or a group of geniuses using the alias “Satoshi Nakamoto”. In 2009 open-source software was released as an opposition to current banking system. The main idea was, and still is, to revolutionize stagnant economical system – to put the seller in charge, eliminate the middleman, cancel interest fees, and make transactions transparent, to hack corruption and cut fees.
“Satoshi Nakamoto” is modern-day story full of mystery and intrigue, as no one even knows who and where the person or the group of people is. There are many different theories and speculations about the phenomenon, but let’s not go too deep into those conspiracy theories. However, the stories are no more that just speculations.
Interesting thing is that in 2015, Satoshi Nakamoto was nominated for a Nobel Prize in Economic Sciences by Bhagwan Chowdhry, a professor of finance at UCLA, even though he is not not eligible for the Nobel Prize due his anonymity and general lack of information about his existence.
Where is bitcoin kept?
As you probably understood already, bitcoin is all digital. It is created and held electronically. What is bitcoin need to be stored, is a digital wallet. So in other words bitcoins are stored in digital wallets, which are held either in the cloud or on a user’s computer or storage device. A digital wallet is a system that securely stores users’ payment information and passwords for numerous payment methods and websites – all the information necessary to transact bitcoins.
Every wallet is provided with a private key (51 random alphanumeric characters) for every bitcoin address that is saved in the bitcoin wallet of the person who owns the balance. Many free bitcoin wallets are available for all major operating systems and devices to serve a variety of your needs. By using a digital wallet, users can make purchases easily and quickly with near-field communications technology.
What is block chain and how is it relevant to bitcoin?
To ensure the integrity of the currency, a record of each transaction, using anonymised strings of numbers to identify it, is stored on a huge public ledger known as a block chain. Therefore, bitcoins are inseparable from the blockchain transaction ledger, that stores all bitcoin transactions.
In the blockchain, bitcoins are registered to bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. It means that though each bitcoin transaction is recorded in a public log, neither transactions or accounts are connected to real world identities, owners are never revealed – only their wallet IDs.
What’s up with bitcoin price?
Like all assets or currencies, bitcoin’s price is determined by the amount that people are willing to pay for it. Whether that valuation is “right or wrong”, and whether bitcoin is truly worth that amount or not, is largely down to opinion.
Bitcoin has already seen regular massive hikes in price in the past few years. The price varied from $0.003 in 2010 to $17 900 in 2017. At the moment the price dropped and reached around $6 616. The prices vary significally every day. While no one is entirely sure how bitcoin will continue to spread to the larger financial world, it is believed that a limited supply of the currency may cause prices to continue to increase.