Bitcoin is a digital currency or currency that you can buy, order online, or use as an investment.
What is Bitcoin?
If we want to be very brief and concise about what Bitcoin is, we can define it as a kind of digital money. This definition is very simple and ignores many aspects of it, but it seems to be enough to get started.
Bitcoin is a digital currency that you can use to make online purchases, buy or consider it as a kind of investment. These different functions and different uses that you can have, may be the most important reason and the best answer to the question of why you should become more familiar with Bitcoin.
Thousands of years ago, after cavemen began farming and animal husbandry, they faced new challenges. The need for food and shelter for early humans, which was their most basic need, was often met by hunting animals or using fruits and plants. With the beginning of animal husbandry and animal husbandry, as well as agriculture and the sowing of edible plants, the number of crops grown and produced by humans also increased. With the increase in these products and the fact that many of these foods had a long shelf life that deteriorated after this time, humans began to exchange goods for goods, which was the prelude to the emergence of money.
The exchange of goods with goods had problems, including the difficulty of transporting the goods exchanged and the difference in their value. The farmer, who wanted to take a sheep from a rancher, did not know exactly how much wheat to give him in return. These problems led to the creation of intermediaries called money, which changed shape over time.
The people of each region of the globe used their own money, which was often obtained directly from nature. At one point in history, salt was used in many areas as an intermediary to determine the value of various goods, in some areas seashells, and even in a period of time cotton was used as money. But each of these currencies was devalued and discarded after a rich source of them was discovered.
The cycle of money evolution continued with the advent of various types of money until it reached the gold and silver coins. These metals have been used for more than a thousand years as money in various empires and kingdoms engraved with coins depicting their kings because of their durability, limited resources, and the fact that they were difficult to forge. But metal coins also had their own problems, and carrying them was a challenge for metal coins because of their heavy weight. To solve the problem of carrying metal coins, centers were set up to give metal coins, receipts, and paper documents to merchants, indicating that they could receive metal coins only by giving these receipts to other centers.
The evolution of these paper receipts has led to what we now know as banknotes. Initially, the value of each banknote was determined by a certain amount of precious metal, but this is no longer the case today. It’s good to know that today’s banknotes that you buy with or keep in a bank account have no backing, which is why they are called unsupported currencies or fiat. In other words, the reason why today’s paper currencies or digital numbers in your bank account are valuable goes back to the credibility of the government that publishes them. In fact, the value of our current currencies is determined by the control that governments can exercise over them. But what is the place of bitcoin in the brief history we have of the origin and evolution of money? And why is Bitcoin continuing this cycle?
Who controls Bitcoin?
Unlike today’s currencies, which are available to governments for distribution and distribution, Bitcoin is not controlled by any particular individual, group or organization. People entering the Bitcoin network must accept the rules of the network. These rules are in the form of programming codes that can be viewed by everyone on the Internet.
There are several groups on the Bitcoin network, the most important of which are the developers (the same people whose photos you may have seen with shovels and pickaxes who have no resemblance to these photos at all!), The developers (programmers who are responsible for improving the software). Bitcoin was voluntarily taken over) and network nodes (devices connected to the network) were mentioned.
Each of these groups has a specific function on the network; for example, miners or miners do the job of verifying the transfer of bitcoins, also called transactions, on the network. Or developers are voluntarily responsible for upgrading Bitcoin software and its capabilities. Nods also store and store the history of transactions that take place on the network on their hard drives.
Bitcoin is not really controlled by any of these groups, governments or other specific individuals. The interesting thing that should be said is that the cooperation and activity of the various groups present on the Bitcoin network will continue to live and grow.
But why should there be such a system, which at first glance seems complicated? What’s wrong with traditional banks and financial systems that lead us to use bitcoin?
What is the purpose of Bitcoin?
In short, the purpose of bitcoin is to transfer or securely store money. Therefore, it can be considered a secure digital payment and banking system. In fact, Bitcoin has returned real money control to individuals, and with a special password called a private key, only the owners of these keys will be able to spend and transfer bitcoins.
On the other hand, digital currencies have always faced a major problem called “spending twice." There was no problem with paper bills and physical money, for example you could not use the money you spent on buying a TV again to buy another product. But in the digital world, it’s different. If digital money is like a file, you can spend it simultaneously in two separate locations, and you can make your purchases until the sellers know about it. That’s why before the advent of digital currencies, there was always a central organization to look at people’s inventories to prevent this from happening. But with the advent of bitcoin, the existence of a central organization was abolished, and the responsibility for reviewing these transactions fell on all members of the network. So another important goal of Bitcoin was to solve the problem of spending twice as much without trusting anyone else.
Who is the maker of Bitcoin?
Bitcoin was born in late 2008. You probably remember the big financial crisis of 2008 and the events of that time in the news. It was during this time that an unknown person or group, nicknamed Satoshi Nakamoto, sent an article to a large number of cryptographers talking about a new electronic currency called bitcoin. In this article, which is also referred to as White Paper, Satoshi Nakamoto described bitcoin and how it works.
A few months later, in early 2009, the Bitcoin network began operations. Satoshi Nakamoto was involved in the project in the early years, fixing its shortcomings with other developers who joined the project until it disappeared in late 2010.
So far, more than 10 years after the creation of Bitcoin, the identity of Satoshi Nakamoto has not yet been determined. Satoshi Nakamoto can be an individual, a programming group, or even a secret government organization. There are many hypotheses about the identity of Satoshi Nakamoto and the claimants who introduced themselves as the creators of Bitcoin. However, none of them have enough evidence to substantiate their claim.
Why is Satoshi Nakamoto’s identity unknown?
Satoshi Nakamoto kept his identity a secret, and he probably had strong reasons for doing so. One possible reason is that John Satoshi Nakamoto is in danger of making bitcoins. As we will outline the features of Bitcoin, this economic innovation has the potential to knock out big banks and financial institutions, and that’s why it could have had so many enemies from the start. If the identity of the creator of Bitcoin is known, the possibility of being arrested and facing various dangers could be faced by the individual or the manufacturer.
On the other hand, it was said that Bitcoin is not under anyone’s control. This feature, which is referred to as decentralized and will be discussed in full later, is mentioned in an email from Satoshi Nakamoto, which only happens when it keeps its identity secret. If the identity of the creator of Bitcoin was not unknown, then Satoshi Nakamoto’s ideas and opinions could have a great impact on it during the development of the network and take it out of decentralization.
Is Bitcoin made by the US National Security Agency?
One of the most controversial hypotheses about the constructive identity of bitcoin goes back to the US government. According to this hypothesis, Bitcoin is an experimental project created by the NSA to prepare the available space and later launch digital currency, which is completely controlled by the US government. Even one of the founders of the Kaspersky Security Company repeated this hypothesis. But to what extent can this be true?
For the most part, bitcoin encryption is a function used by NSA. Satoshi Nakamoto is also believed to have more than a million Bitcoin coins. So if you’re a skeptic who is also interested in conspiracy theories, you probably believe this hypothesis. But the worst thing the NSA could do is build a digital currency that no one can control! On the other hand, who Satoshi Nakamoto was should not be a big deal, because everyone can see the bitcoin code and the rules are clear to everyone. For those who want to break these rules, the network will block their activity.
What is its support?
Surely the question has arisen for you, what is the support of Bitcoin? In answer to this question, it should be said that nothing; bitcoin has no support! But one question, what do you think the currencies you use every day, and currencies like the dollar and the euro, support? The answer to this question is the same.
Bitcoin, like today’s currencies, is not backed by precious metals such as gold or commodities. The fundamental value of bitcoin and non-volatile currencies stems from popular trust, which they believe is valuable. Just as you believe that you can give your banknotes to the store and buy the goods you need, so the shopkeeper knows that by giving these banknotes, he can buy the goods he needs. These banknotes are thus available in the community. be.
But on the other hand, looking at the use of bitcoin in today’s world, we can see that most people buy to invest in bitcoin, not to use it in their payments. That’s why there’s another view that bitcoin, in addition to being able to play the role of a currency, can also be used as an asset, a asset that can retain its value over time. For example, the value of gold against commodities such as food and clothing has been an almost constant ratio over time. Accordingly, Bitcoin can also be considered an asset due to the features that we will introduce in full below. But how is Bitcoin valued and who determines the price of Bitcoin?
How is its value determined?
The value of bitcoin is not determined by a specific individual or group. Just as the price of gold in global markets is determined by supply and demand, so is the price of bitcoin in exchanges and brokerages based on the two main factors of supply and demand. If the supply force in the market exceeds the demand, the prices will move in a downward and decreasing direction until the demand level is equal to the supply again.
Bitcoin, on the other hand, can be considered to have a fundamental value, given its network status and the cost that miners spend on extracting a unit. Despite the different valuation methods, the price of bitcoin is ultimately determined by the supply that can be made by the miners or the demand that is formed by the investors.
What distinguishes Bitcoin?
Transferring and spending bitcoins requires no permission from banks or any other entity. On the other hand, you may have heard that bitcoin is the money of criminals and is used to remain anonymous in criminal activities. But apart from the misconceptions that newspapers, news, and media have attributed to Bitcoin, this digital currency has features that set it apart from other physical and digital currencies. The basic and important features of Bitcoin are as follows:
What does it mean to be decentralized?
To better understand the nature of decentralization, you may need to first become familiar with centralization and better understand the effects of having a centralized system on monetary and financial systems. Being focused means that when you go to the bank, the payment system can be down (right or wrong!) And you have to wait for hours to do your banking. A centralized system means the control that governments have over money, and the harmful effects of such control, such as inflation and the devaluation of money, are not hidden from anyone. A centralized system means that banks can close your account without notice. And ultimately, the centralization of the monetary system means that one country has the power to impose sanctions and take another country out of the financial transfer cycle.
But the most important feature of Bitcoin is that it is decentralized. As mentioned, Bitcoin is not controlled by any individual, group, organization, bank or government. The decentralization of bitcoin means that power is distributed among individuals on the network. This power can be the same as the power to create and distribute money, which has been taken out of the hands of the banks and returned to the people. Accordingly, the trust you have in third parties and intermediaries such as banks in money transfers is distributed among all those who monitor transactions, and so-called you trust a system, a system whose rules are clearly written in programming codes. You can use it voluntarily.
The decentralized nature of bitcoin has led people who first realized the weakness of financial systems in the 2008 financial disaster to turn to the technology. The strength of the banks’ control of money supply and the inflation that led to it was one of the reasons for the emergence of bitcoin.
Is the number of bitcoins unlimited?
Governments and central banks have the power to print money indefinitely, thereby reducing the value of their national currencies. On the Bitcoin network, although everyone can participate in the creation of new monetary units, the total number of coins that can be made is limited to 21 million units. Limiting this number is one of the same rules written in network codes. The set of network rules is also called a protocol.
New bitcoins are generated and released on a network in a process called mining. You may have seen this process in pictures of tired miners who have fallen to the rocks with shovels and pickaxes and taken out coins marked B or the same as Bitcoin. But this process is quite different from what is shown in these photos, and we will explain it below. Bitcoin mining is declining over a period of time, making it increasingly difficult to extract new units. One of the main reasons why it has become more valuable over time or in other words, its price is limited.
This feature, which makes Bitcoin scarce, contrasts with the inflationary nature of today’s currencies, whose value gradually declines over time. Of course, the limited number of bitcoins has made it a tool that can store value over time. Investors’ interest in buying bitcoins and attributing titles such as digital gold to it are proof of this.
Are transactions anonymous?
In electronic and banking payment systems, customers usually need to register or open an account with their identification details. But in Bitcoin, things are different, and building an account, or rather a new wallet address, can only be done in a matter of seconds. The network will not ask you for identity information, national code or similar information, but this should not confuse you that Bitcoin is an anonymous system and your activity will be hidden. Although you can create a large number of addresses every minute and send them bitcoins, you should know that these transactions are not anonymous. In fact, it’s safe to say that bitcoin transactions are semi-anonymous (something between anonymous and anonymous).
Bitcoin transactions are transparent, and any transactions made on the network are visible to everyone. That is, anyone can track a transaction, but not to identify individuals, and only addresses can be seen with their receipts and submissions. However, digital currency exchanges, where bitcoin is traded, use authentication to prevent criminal activity and issues such as money laundering, so that if any crime occurs, coins can be bought or sold. Pursued through legal authorities. That’s why Bitcoin is not a good tool for criminal activity, and transactions can be tracked.
Why are Bitcoin transactions irreversible?
Suppose you want to send money to a friend and you go to the bank. After entering the amount and card number of your friend, you will finalize the transfer without reading the recipient’s details again. But this transfer has been made to another destination and your friend’s card number has been entered incorrectly. After going to the bank, following up on the wrong transaction, and in some cases going to the judiciary, you can eventually get your money back.
But in the case of Bitcoin, the situation is different. Money sent to the wrong address is not refundable and you must say goodbye. Once a transaction is registered and verified in Bitcoin, it is sent to all members present on the network and it is no longer possible to change it. This may seem like a negative at first, but let’s not forget that one of the reasons Bitcoin is decentralized is that it is not controlled by a specific group. Banks in the current financial systems are the same groups that have the power to manipulate transactions.
It is interesting to note that so far many bitcoins have been lost due to entering the wrong address or forgetting their private keys, and access to them is not possible.
Can it be forged?
Bitcoin is not counterfeit. As mentioned, the total number of units is limited to 21 million units, and on the other hand, no one can create a fake transaction on the network and enter the bitcoin out of the existing rules or steal other people’s bitcoins by doing so.
The basis for Bitcoin’s forgery is the encryption techniques used in it. If Bitcoin was a digital file that you could only copy to create as many new units as you wanted, it could be forged, but the use of tricks like private key and public key has led to something called fake bitcoin. Not have.
What is the advantage of bitcoin transportation over gold and money?
One of the top features of Bitcoin over older generations of money, such as gold, is that it’s easy to carry, regardless of the amount. In the past, traders had to carry bags full of gold coins on cattle to carry large sums of money, which, of course, had its own dangers, and thieves might steal in the middle of the trail. But with Bitcoin, you can move any amount of money just by typing in a string of phrases called private keys.
Of course, given the wallets available for Bitcoin, it can be carried in hardware similar to Flash Drive, which can be even more secure than a piece of paper. A wallet is hardware or software that is used to store bitcoins and other digital currencies.
Published and authored by FalconProfit.com