What is Bitcoin ?
To cut through some of the confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code that represents ownership of a digital concept – sort of like a virtual IOU. On the other hand, you have bitcoin-the-protocol, a distributed network that maintains a ledger of balances of bitcoin-the-token. Both are referred to as “bitcoin.”
The system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is created and held electronically. Bitcoins aren’t printed, like dollars or euros – they’re produced by computers all around the world, using free software.
It was the first example of what we today call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography.
The story of How Bitcoin came into Existence :
The concept of Bitcoin was proposed in 2008 in a white paper by Satoshi Nakamoto on a mailing list about cryptography. Until now, it was not known whether Satoshi Nakamoto is the name of a real person, a pseudonym or a collective pseudonym for a group of people , Bitcoin is based on the idea of a cryptographic currency, described by Wei Dai as b-money in 1998 and Nick bitco as bit gold.
The Bitcoin network was created on January 3, 2009 with the creation of the first 50 Bitcoin and the “Block 0”, the so-called Genesis block of his “Chain”
How Bitcoin works :
At its core, Bitcoin consists of a payment system and a monetary unit, which is managed or acquired locally in a computer network using its own software. The system is based on a decentralized database managed by the participants, in which all transactions are recorded in a blockchain. The only condition for participation is a Bitcoin client or the use of an online service provider providing this functionality. As a result, the Bitcoin system is not subject to geographic restrictions – except for the availability of an Internet connection – and can be used across borders.
What are the superioer Features of Bitcoin ?
1 – It is forgery-proof
Counterfeiting of units or transactions is not possible by the asymmetric cryptographic technique used to create and validate digital signatures with resources available at the present time (2017). The duplicate output of the same bitcoins is prevented by means of the proof-of-work procedure. An attacker would spend more time on average than any honest Bitcoin member to fake the proof of work. However, this only applies to transactions that have already been confirmed.
2 – The cost and execution speed of Bitcoin
Payments can be made between the parties without the involvement of financial institutions. The confirmation of a transaction currently costs (as of December 2017) about 19.50 € (at a bitcoin price of 13,000 €). In the past, this transaction fee was much lower. If it is increased voluntarily, this can speed up the confirmation process by giving the calculation a higher priority, while the omission of the fee, which is technically still possible at present, extends the confirmation period or makes the transaction unsafe. The fee is credited to the participant who creates a new block with this transaction. This is to prevent the network from being overloaded by very many small transactions. In the long run, these charges are planned as a reward for maintaining the network by providing computing power.
The confirmation of a payment lasts as long as the creation of a new block, so about 10 minutes. However, the system does not immediately agree on a single acknowledgment. Any further confirmation, which again takes about 10 minutes, increases the likelihood that the payment will be permanently preserved. After six consecutive confirmations, one payment is confirmed as sufficiently binding.
3 – It is Decentralized
The system is completely decentralized due to the peer-to-peer structure, similar to systems such as BitTorrent. Influence on the money supply would require that the majority of mining computing power be done with modified software, otherwise there would be a not universally recognized Fork of Protocol and payment unit.
4 -Limited supply
Fiat currencies (dollars, euros, etc.) have an unlimited supply – central banks can issue as many as they want, and can attempt to manipulate a currency’s value relative to others. Holders of the currency (and especially citizens with little alternative) bear the cost.
With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. A small number of new bitcoins trickle out every hour, and will continue to do so at a decreasing rate until the maximum of 21 million has been reached. This makes bitcoin even more attractive as an asset – in theory, if demand grows and the supply remains the same, the value will increase , like it does since the creation of Bitcoin.
5 –Irreversibility of transactions
Blockchain confirmed payments with Bitcoin can not be reversed. This represents an advantage for the seller in online trading, as it is not possible to repay payments in the case of fraudulent purchases. Once misappropriated, money can not be repaid by a central authority. Within the Bitcoin system, the recipient is anonymous and can not be contacted. Therefore, if a payment is made in error, it is either dependent on the recipient revealing his identity outside the Bitcoin system, or proving goodwill in general, and remitting the unexpected deposit back to his account. The accidental entry of wrong addresses due to typing errors is prevented by the evaluation of a checksum.