What is bitcoin?

“What is bitcoin?” and “Is it possible to gamble with bitcoin at online casino 日本?” – this question continues to be asked every day by masses of people around the world.

In order to meet people’s curiosity and share our knowledge with the world, we will try in this article to explain the specifications of this digital asset and the genesis and idea that brought it to life.

Bitcoin is the innovative digital currency of the information age, also known as the “gold of the Internet”.

Bitcoin (BTC for short) is a decentralised currency, that is, without a central issuing institution, remaining independent of banks, governments and other organisations that mediate its exchange. It is a currency that knows no boundaries and can be accessed anywhere the Internet can be accessed. Bitcoin is a currency that you can instantly send to anywhere in the world, bypassing banks and intermediaries and what comes with that

  • often costly commissions
  • time limits
  • technological limitations

Given that some of bitcoin’s functions such as its intangible nature and its ability to store value have been described many times before, this time we will try to look inside the foundations and origins of bitcoin to provide the most complete answer to the question of what is bitcoin?

Bitcoin is information

Information which can be accessed by anyone connected to a network and verified by anyone. Furthermore, bitcoin has an open source code so that anyone can see how it works at any time. Of course, this requires knowledge of information technology.

Bitcoin is a network

BTC is the currency of the Internet and operates through a P2P network (peer to peer, i.e. where all users have equal rights). No one controls or exercises supreme authority over the bitcoin network. Bitcoin is a digital currency, maintained by a community in which everyone has the same rights and privileges. Thanks to this, despite the anonymity of each individual member of the network, all activities are fully transparent and visible by other participants “like the palm of their hand”.

Any changes made to the Bitcoin protocol must be approved democratically by an appropriate number of network users. Bitcoin’s creator Satoshi Nakamoto himself would currently have little say in protocol changes if the community did not support his ideas. This removes the associated doubt that someone would ever be able to block appropriating our bitcoins.

How can we be so sure?

Bitcoin is based on mathematics and cryptography. Its code prevents cryptocurrencies from being artificially added, blocked or counterfeited, making it impossible to influence supply. With basic security measures in place, your bitcoins cannot be confiscated by “superior forces” (e.g. government, bank, bailiff, spouse on divorce, etc.). Bitcoin therefore provides you with a 100% guarantee of ownership of your money.

Limited supply

Bitcoin is a currency limited in quantity. Unlike banknotes, which have no limited circulation, bitcoin can only create 21 million. As of the writing of this article, there are 18.74 million bitcoins in circulation, or 89% of the total available supply. You can check the current amount of bitcoin in circulation on the coinpaprika website, under “available supply”, among others.

The limited supply makes it an inflation-proof asset. BTC is also a currency that is divisible to 8 decimal places, so no matter what the price of bitcoin will be in a few years, you will still be able to pay with it, for example for coffee or everyday purchases.

Bitcoin is an anonymous currency, yet fully transparent. All transactions on the network are public and it is possible to trace the complete path of each bitcoin in circulation. However, those making the transactions and those receiving them are only included in the accounts as a string of numbers and characters – so-called public wallets.

Can bitcoin be money?

Money is a tangible or intangible good, known by general consensus as a means of economic exchange. For reasons of convenience and equal conversion, all prices and values of goods or services are expressed in it. It used to be, for example, pebbles or seashells; today we have banknotes and electronically recorded balances.

Bitcoin incorporates each of the above features, in addition to more accurately addressing the need for each point, through two cryptographic mechanisms

  • digital signatures based on a public key, allowing transactions to be authenticated on the network
  • a hash function for proving the work done for the bitcoin network. This is directly related to the Proof of Work algorithm, which involves solving a computational problem and confirming its correctness, thus proving the work done for the BTC network.

Does bitcoin have value?

The current money we use every day is fiat money. The etymology of this word, can tell us a lot about its specifications. The name “fiat money” comes from the Latin word fides – meaning faith. In this case, we are talking about faith and trust in governments and banks, which are responsible for issuing and monetary policy.

The gold parity was in force until 1971. Until then, every banknote or coin produced had to be backed by gold. Nowadays, central banks issuing currency do not have to think about its cover in material goods. Individual countries have full freedom, guaranteed by international law, to set the exchange rate rules for their currencies. The value of such a currency, comes from the monopoly, which guarantees the exclusivity of the issue and is legally reserved by the state for the state. An important support of the value of money is also fiscal policy, generating demand for currency and the trust of citizens in the state and the stability of its currency.

With the help of mechanisms such as money printing or changing interest rates, the state decides on the value of the funds we have in our wallets or accounts. By constantly issuing more and more banknotes, we experience a drop in the purchasing value of each of them. We call this process inflation. So one can argue about whether forced fiat money is really in keeping with the spirit of the free market?

The free market

So if someone asks you “what is bitcoin?” you can answer that bitcoin is the opposite of fiat money and its value is determined by the free market – supply and demand. Bitcoin cannot be printed, is immune to inflation, and its value is independent of governments and banks. For the reasons mentioned above, bitcoin is more similar to, say, gold (hence the term “internet gold”) in that it is difficult to obtain, its supply is limited and it is subject to the same “mining” process (although this takes place in slightly different ways). (although this is done on slightly different principles than standard mining). Bitcoin is based on cryptography and computation, and the element of trust is replaced in it by mathematical proof.

The value of bitcoin depends on its popularity, its usefulness and the difficulty of mining it. We know from basic economics that when demand increases and supply stays the same, we can see the value of an asset increase. As the amount of bitcoin is limited and there are more and more people wanting to get their hands on it, we have seen its value increase over the years. Within a decade, the number of cryptocurrency users has grown to tens of millions and is growing exponentially.

The biggest advantages of bitcoin

Very fast transactions between any two places in the world. No more waiting several days for funds to reach the recipient, for example in China or the USA.

Relatively low, barely noticeable commissions for transactions. Especially for transfers of large amounts. In the example from the tweet, about USD 400 million was sent in 15 minutes, and the transfer commission was as much as a small coffee in a cafe.

A certain degree of anonymity of the transaction, which, however, can easily be increased with tools such as VPN.

No intermediaries when transferring money. The transfer goes directly to the recipient without the involvement of banks and other financial institutions,

The number of “digital coins” BTC is limited. It is not possible to add a single piece over their maximum, predetermined number – 21 million BTC. This makes bitcoin more resistant to inflation than traditional currencies.

There is no way for anyone to block your account. The system works on a p2p network so there is no owner or manager to freeze your funds. As long as you don’t use your private key left and right and follow basic internet safety rules, your bitcoins are safe and the risk of losing them is marginal.

It is not possible to undo a transaction. If someone pays you for your goods, you are 100% sure that they cannot undo the transfer, as is the case with banks or well-known e-payment systems such as PayPal.

Amazing convenience and independence. Right after creating a wallet, you can use bitcoin without any registration, verification or unnecessary bureaucracy. However, these are sometimes necessary when withdrawing BTC to fiat currencies.

“What is bitcoin?” – let’s recap:

Bitcoin is information transmitted over a decentralised network. The correctness of this information, and thus the consistency of balances, is ensured by mathematics and cryptography. Bitcoin solves the problem of long and expensive international transfers, even where banking is limited (e.g. countries in Africa). Even standard domestic transfers can be made more efficiently with bitcoin, e.g. on weekends or holidays, and at times when banking systems are undergoing maintenance. Since its inception over 10 years ago, the bitcoin network has been active 99.98% of the time – that’s only a 2 day gap in network availability over the decade. Bitcoin is great for online micropayments and international trade. BTC is a digital currency and it works best online.

Congratulations! You already have a basic knowledge of what bitcoin is and know more about it than 99% of the population. Do you want to deepen your knowledge and gain a deeper understanding of how bitcoin works? Or would you prefer to find out right away how you can become the owner of your first bitcoin?

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