Bitcoin is the first decentralized digital currency worldwide. Digital currency means computerized, thus, without physical form. Bitcoin is stored in digital addresses located throughout the Internet. It’s decentralized since there was no central bank behind it, and no one controls its distribution amounts. Nor bank, no individual, company or government.
How come there is no central bank behind it?
It is thought that a body such as a major bank or government must stand behind any currency and take care of the stability of its economy. The fact is that only a few decades ago began the Debt Economy, is the era we live in today, allowing the central bank of any country to print new bills at will without linkage to any tangible asset base (eg, gold). This mechanism creates inflation: continued price rises, and the erosion of the value of the currency over time. It should be noted that before this era, the money was not controlled by the government or the central bank. Just like the idea of Bitcoin, which enables us to have complete control over the amount of money that we hold.
Who invented the Bitcoin? When was it invented?
In 2008, during the Sub-Prime, the global economic crisis which began in the US, a man known as Satoshi Nakamoto decided that this is the right time for the first digital decentralized currency. A coin with no commissions and not controlled by the central bank. A cryptography coin which is based on encrypted technology, and is transmitted via the Internet using peer to peer technology.
In its first two years of the existence, Bitcoin had almost no value, but began to form around active communities and anonymous online forums who constantly improve the original code. In 2010, Satoshi suddenly left the development of Bitcoin and completely disappeared without leaving a clue about his true identity. In later years the community has evolved, and in its peak, one bitcoin reached a value of around US $ 1,200. In May 2016 Satoshi Nakmoto was revealed, creating global buzz in the worldwide press. It turns out that Satoshi is an Australian entrepreneur with the real name of Craig Wright.
Why Bitcoin is so promising?
– Bitcoin has inelastic supply: the total amount of Bitcoin is fixed and known to all – a total of 21 million coins. It is estimated that the last bitcoin mining process will occur around the year of 2040. Then it will be impossible to produce more coins. This fact is expected to create long-term permanent demand for bitcoin and may even cause its value to continue to rise. Currently, there are almost 16 million coins. As miners mine more Bitcoins, the level of difficulty of mining coins is grown at an exponential rate and the amount rewarded miners is decreasing.
– Transfer speed: Unlike traditional financial systems, Bitcoin online money transfers are instant. You can transfer any amount to any place on the planet in just seconds.
– Zero fees: The face that bitcoin is traded directly between people without intermediaries greatly reduces commissions paid on each transaction. In addition, in contrast to bank fees which are usually decent percentage of any transaction, the commission is minor and goes to the miners who perform work essential work of calculations.
Bitcoin mining – Creating new coins
Mining is carried out by members of the bitcoin community, who contribute to the calculation power of solving complex mathematical problems in order to create new bitcoins. The first computer to solve the mat problem, gets rewarded by the created Bitcoin. This computational power is really the engine behind the digital currency and this generates the encryption process and increases Bitcoin’s security, as well as responsible for execution and confirmation of all the transactions that take place in the Bitcoin network. All mathematical solutions produce a product called block. Each block contains the most recent transactions of the Bitcoin network and constitutes the infrastructure for the currency need to survive. This compensation mechanism of harnessing computing power of the community in exchange for Bitcoin, promising that as long as there will be value for Bitcoin – the train will continue.
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