The Ultimate Guide to the Popular Digital Currency – Bitcoin If you’re new to Bitcoin, you may be wondering: what exactly is it? Bitcoin is the first decentralized digital currency, which means it is a virtual currency that is not controlled by any government or central bank. It allows for the transfer of value from anywhere in the world, at any time of day, with low fees and in a short amount of time. In this post, you’ll learn all about Bitcoin, its benefits, how it works, and more
General Background Information:
Let’s start from the beginning, what is Bitcoin? Bitcoin, also known as BTC, was introduced to the world in November 2008 as an academic paper sent by Satoshi Nakamoto to his colleagues on a well-known cryptography forum. The title of the paper was “Bitcoin – A Peer-to-Peer Electronic Cash System,” describing a digital cash system based on a network of peers. It’s ironic that the year 2008 was marked by one of the biggest financial crises in history, which still affects us today, and now, almost 10 years later, a decentralized digital currency emerges, giving some power back to the public.
The Image Of Bitcoin In The World
In the early days of Bitcoin, it gained widespread attention thanks to two controversial platforms where the currency was used as a means of payment. One platform was the whistleblowing organization Wikileaks, led by Julian Assange. Wikileaks leaked information and documents obtained from giant corporations, governments, and agencies in order to raise awareness and expose what goes on behind the scenes. Following threats of leaks of documents from the American government, the US decided to impose massive economic sanctions on all funding channels of the organization: credit, banks, clearing systems, and more.
After more than half a year of public discussions on the topic of digital currencies, one of which was attended by none other than Satoshi Nakamoto himself, Assange decided to open a Bitcoin wallet to receive donations for the organization.
In November 2017, when Bitcoin crossed the USD 10,000 mark for the first time, Asanj acknowledged the US government’s economic sanctions on Twitter. He credited the sanctions for allowing the organization to fund more than it expected and generate very high returns on donations (tens of thousands of percent).
Silk Road was the second platform mentioned. It was an electronic trading platform on the DarkNET (a hidden internet network mostly used by criminals). It was the Amazon of fake identities, prescription drugs, marijuana, and more. It operated from 2011 to 2013 and amassed a huge user base, all Bitcoin “consumers,” until its founder was arrested and banned.
On one hand, both platforms are indeed to blame (mainly) for the negative image attached to Bitcoin in the media, as a virtual currency used for money laundering, funding terrorism, buying drugs, and financing criminals (an unjustified image since today only a small percentage of transactions are attributed to crime). On the other hand, it was the first proof that Bitcoin can serve as a means of payment (and currency) for anything and everything, and of course, the huge user base and exposure that Bitcoin received helped its further development.
Who Is Behind The Bitcoin Currency?
Investors and developers from around the world are behind the creation and ongoing development of the Bitcoin currency. However, the identity of the original creator, who goes by the pseudonym Satoshi Nakamoto, remains unknown to this day. Various individuals and groups have been speculated to be the true identity behind this mysterious figure, but no one has been confirmed.
How Does The Bitcoin Currency Work?
Bitcoin is a decentralized digital currency that operates on a peer-to-peer network. Transactions are verified by network nodes through cryptography and recorded in a public ledger called a blockchain.
In order to acquire Bitcoin, users can either purchase it on a cryptocurrency exchange or receive it as payment for goods and services. Each Bitcoin transaction is verified by network nodes and added to the blockchain, which serves as a permanent and transparent record of all Bitcoin transactions.
The process of verifying transactions on the Bitcoin network is called mining. Miners use specialized software and hardware to solve complex mathematical equations and confirm transactions. In return for their efforts, miners are rewarded with newly generated Bitcoins.
One of the unique features of Bitcoin is that there is a finite supply of 21 million Bitcoins that can ever exist. This limit ensures that the currency cannot be devalued through inflation. Additionally, the decentralized nature of Bitcoin allows for greater transparency and eliminates the need for intermediaries such as banks to facilitate transactions.
Overall, Bitcoin operates on a decentralized network, with transactions verified through cryptography and recorded on a public ledger. The process of verifying transactions, known as mining, is incentivized through the generation of new Bitcoins.
The advantages and disadvantages of Bitcoin currency
The benefits of Bitcoin
In essence, the true meaning behind Bitcoin lies in the freedom it provides. Governments and banks control our money and force us to use it only for what they deem appropriate. The perfect example of this can be found in the world of Bitcoin itself – when banks like Leumi stop transfers to trading arenas or currency exchanges and do not allow their customers to buy freedom, ahem… Bitcoin.
Faster transaction speed – Today, if we want to send money abroad, we usually have to wait between three days to a week. With Bitcoin, money can be transferred anywhere in the world in as little as 15 minutes.
Reduced transfer fees – For the same bank transfer to be made abroad, which takes several days, we will also need to add a draconian fee of over 6% in most cases. With Bitcoin, the fee protocol is designed in such a way that the fee will be minimal relative to the transaction. To understand how the fee mechanism works, click here.
Cannot be forged – Thanks to the cryptographic connection between a block and its predecessor.
Increased transparency and trust – The fact that the accounting ledger (blockchain) is on the network, updated in real-time and exposed to everyone, indicates its transparency and greater reliability compared to existing systems in the world today.
The drawbacks of Bitcoin:
Bitcoin is not truly anonymous, it is pseudo-anonymous. When Bitcoin holders conduct transactions, their wallet address is exposed to the blockchain ledger. The system cannot directly link the wallet address to the individual. However, in the “hybrid” world we live in, which is a combination of the old reality of centralization and monopolies with a new reality of decentralization and authority decentralization, we still rely on intermediaries in our daily lives. In order to trade on a digital currency exchange, for example, we will need to verify our identity. To purchase Bitcoin with a credit card, we will need to disclose our credit card information. Through these means, it will be possible to link our public wallet address to our private identity.
Scalability refers to the ability to handle larger dimensions (with greater usage and demand). Bitcoin is still in its infancy, and while credit card companies like Mastercard and Visa can handle about 7,000 transactions per second, Bitcoin can currently handle only about 5-7 transactions. However, there are many technological improvements, some of which have already been embedded (but not yet accessible) and some of which are on their way, and they will completely change the picture.
Recommended Bitcoin wallet
Bitcoin is the oldest digital currency, which means there is a wide variety of wallets available for it. These are the recommended wallets:
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1)Hardware wallets – the most recommended wallets. A hardware wallet is an external hard drive that is currently the safest way to hold digital coins.
2)Electrum wallet – The Bitcoin wallet that is perhaps the oldest, with versions available for both mobile (Android) and desktop.
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