What is Bitcoin? – Characteristics, Origin, History, and More
What is Bitcoin?
Bitcoin twist by Satoshi Nakamoto in 2009, along with the software that supports it. Bitcoins are created through a process identify as bitcoin mining, which we’ll explain below. It is still a mystery who is behind that name if a person or institute.
Characteristics of Bitcoin
To avoid the problems derived after a currency that is not backed by an entity or a third party but by a working system, the BTC has several fundamental principles:
Limit of 21 million: The number of units can never exceed 21 million bitcoins. Therefore the money supply is limit, unlike fiat currencies, where the central bank can issue as many as it wants.
Cannot censore: No one can ban or edit transactions that have been validates.
It is open-source: The source code used must always be accessible to everyone.
Access to all: Everyone can carry out Bitcoin transactions without a permit. No single can prevent participation in the network.
It uses pseudonyms: The real individuality of its owner is reflected, and it is not necessary to identify yourself to participate in the Bitcoin network, although, unlike an anonymous network, it allows the possibility of generating a reputation and trust among the different users.
It is expendable: All units are interchangeable.
Payments are irreversible: Transactions that have been inveterate cannot modify or delete.
History of Bitcoin
The origin of Bitcoin as a cryptocurrency dates back to 2009. History indicates that its creator operates under the pseudonym, Satoshi Nakamoto.
While it is true that the domain bitcoin.org was registered in 2008, in October of that same year, Satoshi Nakamoto wrote an article titled “Bitcoin: A Peer-to-Peer Electronic Cash System”.
In said document, he detailed how the network works, how bitcoins generate and what their advantages were. After that, in 2009, the origin of the first open-source Bitcoin client emerge, and the network began to become progressively popular.
How does Bitcoin Work?
Though Bitcoin does not exist physically, it has similar purposes as the rest of the money. Still, unlike a bill or a non-virtual currency, bitcoins do not have a serial number or another type of mechanism to track them. To buyers and sellers who use this computer-generated currency. This makes it good-looking to persons who want or need privacy in their transactions.
Unlike any other currency, Bitcoin is not agreement money. It is back by the trust of a central bank, by a government, or by a substantial (for example, the gold standard ). Instead, they use a proof-of-work system to avoid double-spending and reach a consensus among all nodes operating on the network. This consensus is known as the blockchain.
The Chain of Blocks or Blockchain
The blockchain is an essential piece for the functioning of Bitcoin since, to falsify a transaction, it would not be enough to change one or several computers. As it is a public registry, there may be millions of copies. The records of all the computers that keep a copy would have to change, which is practically unfeasible, as it is an open and public database.
In addition, bitcoin transactions handle an open code for their operation and do not require any intermediary to transmit the transactions. Therefore, its possibilities are to have lower transaction costs.
It should be that the rest of the currencies (such as the dollar, the euro, the pesos or the yen, among others) do exist physically. Still, even so (in 2016), only 8% of the money that exists in the world denominates in those currencies is physical money; the rest is electronic money in bank balances.
How are Used of Bitcoins?
The time has derived from seeing how one can manage with these currencies but are not. Bitcoin is money, and it has specific characteristics that differentiate it from other currencies. However, as a currency, it fulfils the properties of money:
- Serves as an accounting unit
- Exchange medium
- Medium of value preservation
The latter is the one that is causing the most controversy about Bitcoin due to its fluctuating nature. See volatility
There is little or nothing more to add about its usefulness as an accounting unit. The same does not happen with its properties to facilitate the exchange. The appearance of Bitcoin meant the rupture of electronic commerce, as it was known until then. Transactions no longer have to channel through banks or trust financial institutions. This means breaking with the corresponding service fees to which the transactions were subject.
Origin of Bitcoin
To explain the origin of Bitcoin, we must go back to 2009, the year in which this term was first used. It creates by Satoshi Nakamoto (appellation used as a pseudonym for its creator or creators), whose first intention was that bitcoins use to make purchases exclusively through the Internet.
Bitcoin is a computer-generated currency or a means of electronic exchange useing to purchase products and services like any other currency. But this currency is decentral; that is to say, no authority or control entity is responsible for the issuance and registration of its movements. It consists of a cryptographic key associated with a virtual wallet, which discounts and receives payments.
Bitcoin is a virtual and intangible currency conceived in 2009. The term also applies to the protocol and the P2P network that supports it. Generally, ‘Bitcoin’ refers to the network or the protocol and ‘bitcoin’ (plural: ‘bitcoins’) to denote monetary units.
Bitcoin character as decentralises, that is, back by any government or depends on the confidence in a central transmitter. On the other hand, it uses a test system to prevent double-spending and reach consensus among all nodes within the network. Similarly, transactions do not require intermediaries, and the protocol is open source.
The transactions made with bitcoin are through a guild way via the internet, which means that these bitcoin currency transfers can produce nationally and internationally, transferring different amounts between two devices, without the need to attend a bank or organization that handles this transaction.