21 Nov Is the cryptocurrency Bitcoin a good idea?
We live in a fantastic time when something that does not exist is worth more than gold. We are talking about cryptocurrency, which is a phenomenon that turned the traditional financial system upside down.
The first cryptocurrency in the history of mankind is Bitcoin. Today we will talk about it.
Its creator Satoshi Nakamoto forever changed the understanding of money by launching a currency that became the first application of blockchain technology. Blockchain is a continuous sequential chain of blocks built according to certain rules, where each subsequent block stores the data of the whole chain, starting from the very first one.
Moreover, all network blocks are in strict chronological order and are interconnected by a cryptographic signature created using complex mathematical algorithms.
One of the main reasons for introducing blockchains in the financial sector is security. With the launch of Bitcoin, the digital era of economics has begun. Thanks to blockchain technology, Bitcoin has become the first currency that solves the problem of double expenses. Electronic files, unlike paper notes, can be duplicated and spent twice. And all this can be done without using any central server or other third-party authority.
Like everything revolutionary new, at first, Bitcoin was interesting only to a narrow circle of people who were ready for a new digital stage of the world economy and saw the prospects of digital money. For the rest, it was an unknown and frightening world.
Therefore, at the time of launch in 2009, 1 bitcoin was worth 1 cent. But when they started talking loudly about cryptocurrency, the price of bitcoin began to rise and reached the level of several thousand dollars. Everyone became more serious about non-existent digital money and began to delve into it.
At some point, everyone wanted it, and the Bitcoin worth reached almost $ 20,000. And such a success of digital money is quite justified. They are better than traditional ones. Their owners are independent of any financial institutions and manage their cash flow themselves. All operations are protected cryptographically and are transparent.
You can talk about the advantages of cryptocurrency for a long time. But you need to speak in a simple language that is understandable even for dummies so that everyone can figure out how digital money works and why they are needed at all.
How Bitcoin Works
There is an opinion that it is not easy for an ordinary user to figure out where digital money comes from. Many are still wary of cryptocurrency, believing that they will lose their money. In fact, the Bitcoin operation algorithm can be understood without owning specialized knowledge.
The state issues ordinary currency, and this money supply is unlimited. It prints as much money as needed, which leads to their depreciation.
Cryptocurrency is not associated with any state, bank, or other authority. Therefore, nothing affects the functioning of the network. Satoshi Nakamoto managed to create an electronic payment system without centralized control. The participants themselves serve the network. Therefore, new coins appear due to the work of many interconnected computers around the world. In the process of mining, users get new blocks and receive a reward in the form of cryptocurrencies.
The difficulty in understanding the work of bitcoin is that it does not exist physically. There are only special registries in which strict records are kept. This data is combined into blocks, units of information in the network. If we bring a parallel from real life, then blockchain is a book that never ends, the pages of which are arranged in a strict chronological order. Blocks in the blockchain are interconnected through the records contained in them, and each block stores the information of the entire chain. The content of the blockchain is constantly increasing by adding new blocks to the very end of the chain.
All blocks are in strict sequence and are interconnected by a cryptographic signature generated as a result of complex mathematical algorithms. A cryptographic signature accompanies each change in the network, and all participants receive notifications about this. Hundreds of thousands of computers around the world provide operations within the network. A node is a single computer that stores the full version of a blockchain. When a new block appears on the network, all nodes update their blockchain.
How Bitcoin is Supported
Previously, all national currencies were provided with gold or silver. That is, paper money was easily exchanged for an equivalent in precious metal and vice versa. Now traditional currencies are supported by the GDP indicator of a country.
GDP or gross domestic product is a significant economic quantity that demonstrates the total value of goods and services produced.
However, bitcoin is not provided with anything. The price of a BTC digital coin is regulated exclusively by market demand and supply, that is, by what value the users put into it.
Should I invest in Bitcoin? Yes, for sure! It is impossible to mine bitcoins endlessly. The issue of bitcoin is strictly limited to 21 million coins, which is prescribed in the original code. It is assumed that the release of bitcoin will end in 2140 when, after the 21-millionth coin, the network will cease to create new ones.
Limited emissions protect the cryptocurrency from inevitable inflation in the event of market oversaturation.
The superpower of digital money lies in the fact that it can be divided into smaller parts. The smallest unit of Bitcoin is called Satoshi. That is, 1 BTC is 100,000,000 Satoshi.
In fact, the Bitcoin creator rebelled against the system. He taught people how to make money without the participation of all financial corporations. No one controls bitcoins so that no one can take them away. The money belongs to the people, and not to the “chosen ones.” This is a new financial and economic system that frees from constant control by the state and makes people freer.