Bitcoin, or Bitcoin (BTC), is the first decentralized digital cryptocurrency on Earth. She appeared in 2009. It is fundamentally different from all previously created electronic money and payment systems. Bitcoin is not pegged to physical assets, nor to “official” currencies. The price is regulated only by market demand and supply.
Basically, bitcoin is just a computer program. Only it is not located on a separate computer, server or in the cloud, but immediately on millions of PCs that directly communicate with each other through this program. Torrents work on a similar principle, from which we download games and movies.
Principles of operation of bitcoin and BlockChain
The basic principle of creation was to create a system that would not have a main server. Encrypted copies of the database are stored by all participants in the system. If we consider bitcoin, then the base represents all transactions made with the cryptocurrency.
The system of many types of cryptocurrencies is built on blockchain (blockchain). This technology is often associated exclusively with this application, although it is of considerable value in itself and can be implemented in many other projects.
Blockchain is a chain of sequential blocks containing information and built according to an algorithm. In the case of cryptocurrency, each block contains transaction data. To optimize storage, each subsequent block is built into an already created chain.
Any new entry is synchronized with all copies of everyone who participates in the system. Matching algorithms come into play. If someone tries to steal something, then he will have to replace the data of more than half of the participants in the system – hundreds of millions of people.
Cryptocurrency appears through the efforts of users using it, allocating their computing power to process all transactions. Bitcoin does not have a transaction processing center, so users who receive rewards in BTC take on the task of providing computing processes.
Differences between Bitcoin as a cryptocurrency
There is no control. The complete lack of control over the system by anyone. No one has the opportunity to dictate their terms to the owners of cryptocurrency.
Easy to use. It takes less than a minute to create a wallet to store cryptocurrencies and immediately use in transactions.
Anonymity and transparency. You do not need to provide your personal data anywhere. But bitcoin stores the entire history of transactions. (If you make your wallet public, then anyone can see your transactions).
Irrevocable transactions. After sending bitcoins to the selected addressee, it is impossible to return them back to your cryptocurrency wallet, if the recipient of the cryptocurrency does not want to do this himself – return BTC to you.
Are bitcoins a scam?
In general, yes, since no one is responsible for the network and does not guarantee that Bitcoin will not “burst” tomorrow. Demand is formed due to the subjective expectations of the market, and not due to objective economic laws.
But only this is not the kind of fraud when someone deliberately deceives you, misleads you or pulls money out of your pocket. Here people are well aware of all the risks, they just want to get rich.
According to experts, the last bitcoin should be “released” by 2033. That is, until that time, it is likely to grow in price. You still have a chance to buy now cheaper and resell later at a higher price.
Chamath Palihapitiya, an American businessman, venture capitalist, owner and board member of the Golden State Warriors, said that Bitcoin is “a huge, incredible, unique opportunity.
I personally own bitcoins through my fund and through an investment account.” And no wonder, because in 2017 the price of bitcoin soared from $700 in January to $20,000 in December.
How can you get bitcoins?
Anyone can buy bitcoins, but the process can be fraught with some difficulties. It is important to understand that there are no ways to get completely free bitcoin. There are several ways to legally mine bitcoin. Here are the main ways.
Cloud mining is the best way to get bitcoins at the beginning of 2018. You rent the power of a cloud mining service. All the cryptocurrency mined by this power goes to your account. But keep in mind, there are a lot of scam or pyramid sites here, you can only trust old and proven services.
Classic mining is when you do not rent equipment, but mine cryptocurrency on your own: farms consisting of several video cards, one card, or a specialized ASIC. You connect to a pool of miners and mine bitcoin together, the block reward is shared among all participants in the pool.
Buying cryptocurrency — you can buy bitcoin for real money (rubles, dollars, euros and any other world fiat currency) at special exchangers or cryptocurrency exchanges.
Differences between bitcoin and classical money
Bitcoin is a decentralized currency that is not controlled by any bank in the world or the state, none of the governments and oligarchs. It is scattered all over the world, works only online, is not backed by anything, and each user is able to influence the course.
American economist Ben Bernanke, Chairman of the Board of Governors of the US Federal Reserve System (2006-2014), said that “virtual currencies show great promise, especially if innovations in this area make the payment system faster, more efficient and more secure.”
The main differences between cryptocurrencies, and Bitcoin is no exception, from ordinary money:
Decentralization.
There is no central network control authority, it is distributed to all computers used for computing resources and mining bitcoins.
Irreversibility of transactions.
After the cryptocurrency has been transferred from one address to another, it is simply impossible to return it to the original account.
Emission limitation.
Coin generation is closed, the total number of bitcoins will never change. The issuance of bitcoins is limited, the maximum number is 21 million.
Low commission.
There are no intermediaries in the network during the transaction, due to which no commission fee is charged. A small percentage may be in transactions with bank accounts.
Inflation.
Bitcoin is not affected by inflation like regular money. World inflation does not have any effect on the BTC rate, unlike conventional currencies.
Now the question “What is bitcoin in simple terms” can be answered that it is money that has its own exchange rate in relation to another currency (including other cryptocurrencies), but does not have a physical form.