Bitcoin (Bitcoin) is the first decentralized digital currency, created and works only on the Internet. Bitcoin is not controlled by any state, and the turnover takes place in anonymous mode. Currency is issued through the work of millions of computers around the world, which are involved in calculating mathematical algorithms. The emission of bitcoin is limited, everything can be mined no more than 21 million coins, and the last bitcoin will be mined no earlier than 2140.
BITCOIN. GOLD OF THE DIGITAL AGE
I propose to start your acquaintance with bitcoin by watching an interesting, and most importantly, an informative documentary that tells the entire necessary history of bitcoin from its inception.
"Bitcoin. Gold of the Digital Age" - The film in its 43 minutes provides an opportunity to fully understand what bitcoin is and what it is for. The video covers topics: history of money, mining, million dollar pizza, bitcoin in Russia and many other useful information.
KEY BENEFITS OF BITCOIN
No boundaries
Bitcoin is a supranational currency that is not controlled by any organization or legislation. The first and most popular cryptocurrency can help many to enter the international market, thanks to significant savings in transaction costs, since with bitcoin nothing needs to be recalculated and converted into local currency, constantly losing money on ubiquitous fees.
Safety and security
The Bitcoin network is extremely resistant to hacking, as it takes more than 51% of the network's power to attack a currency. This is almost impossible to do, since this network is more powerful than all the supercomputers in the world put together. The use of cryptography with a separation of public and private keys makes the storage of digital assets and transactions truly secure. In addition, Bitcoin includes a multisignature option that allows multiple independent confirmations to be requested to send funds, if necessary. It also provides an additional layer of protection against unauthorized transactions.
New opportunities and technological advantages
Bitcoin has excellent divisibility and is sent in just a couple of clicks. Smart contracts, multisignatures, the presence of many very convenient and modern services make bitcoin a very attractive and convenient means of payment.
Lack of financial intermediaries
In the traditional system, they can be correspondent banks. Making payments directly reduces the time for a transaction, its cost, and reduces the risk of errors. It is worth noting that not so long ago, Facebook and MasterCard conducted research, which revealed that most young people in the United States do not trust the traditional banking system, increasingly resorting to new fintech services.
Absolute transparency of calculations
All payments within the system can be tracked right up to the moment the bitcoins themselves are created, and the transaction history is forever stored in a distributed database - the blockchain. Thus, if you know any bitcoin address, then you can track all incoming and outgoing payments.
Lack of control
Since the blockchain is a distributed database, where there is no single center, this means that no one has the right to cancel and block payments or change the volume of coin supply in the system. Bitcoin does not have a third party and regulatory authorities that could impose their policies, require personal data, set limits and restrictions, or in any way interfere with the operation of the network.
Inflation intransigence
Bitcoin emission is strictly limited to 21 million coins, and the reward for the block found by miners decreases every 4 years. The possibility of additional hidden emission is completely excluded, and the credibility of the issuer is replaced by mathematics and cryptography. The steady growth in demand for this cryptocurrency (along with its limited supply) is constantly pushing the price upward, strengthening Bitcoin against inflation-prone fiat currencies.
Open technology
Decentralization and open source development ensure that one day the Bitcoin network will not cease to exist or be taken over by someone else. The source code of the network is open and available to anyone. This makes it possible to make sure that the program performs only the declared functions.
Quite simply about Bitcoin
A huge advantage currency is that its value it is controlled by neither the Federal Reserve nor the National Bank. This means that the currency retains its value regardless of the global economy, just like the value of rare metals. The value of this currency is determined only by the demand for it, the more people use bitcoin in circulation, the higher the rate for it.
BITCOIN IS BETTER GOLD - BASED ON THE FACTS
With more and more frequent comparisons between Bitcoin and gold as value, means of settlement, as a form of payment, traditional investors are now weighing the benefits of the world's most popular cryptocurrency. Is Bitcoin Better than Gold for Currency?
Standard
Gold is arguably the first decentralized currency to be defined as a thing that has value, but not under the centralized control of any government agency. It has been a sign of wealth and one of the most popular currencies for thousands of years. Physical gold has its own value as it can only be mined slowly over time and not printed quickly like fiat money.
Easy to transfer and safe
Although recognized worldwide as a currency, gold is difficult to use for international trade, but when dealing with large amounts it will be very difficult. To send $ 1 billion to another country, you will need 0.25 tons of gold. This will require tremendous effort and expense in customs, shipping and security. In addition, it will take a long time for gold to cross an international border with enormous risks.
Bitcoin can be transferred in the amount of USD 1 billion digitally anywhere in the world instantly, for a small fee, at no additional cost. This digital transaction is not subject to the rules of any jurisdiction and they cannot be intercepted or captured. In addition, Bitcoin is protected by cryptography and has not yet been hacked despite years of trying. Bitcoin's cryptographic security cannot be compromised even by the most powerful supercomputer. Bitcoin transactions can be done instantly and leave no trace, while a gold transaction is highly visible as it has to be moved by people and all cash is tracked as it moves.
Liquidity
Bitcoin can be easily converted to local currency through peer-to-peer exchanges. For example, Localbitcoins lists traders looking to buy or sell Bitcoin online at any time in over 248 countries. It would be significantly more difficult to exchange gold, as it would be easier to find a buyer for Bitcoin than for precious metal.
Ultimately, if fiat currency collapses, it becomes clear that Bitcoin is in a much better position to become the world's best currency. This makes Bitcoin much more attractive to international trade and finance than gold.
Visually about the possibilities of Bitcoin
Payment in bitcoins can be made anywhere in the world in 10 minutes, without any restrictions on the amount of the transfer. No bank can slow down the process, charge huge fees, or freeze the transfer. The mobile bitcoin client allows you to make scan-and-pay payments. Not necessary card, dial PIN code. All you need to accept a payment is to open the QR code in your mobile wallet and show it to a friend so that he can scan the code with his mobile phone.
DIFFERENCES OF BITCOIN FROM FINANCIAL PYRAMIDS
The explosive success of the first cryptocurrency makes many people look for an answer to the question, why does its price continue to grow so steadily? Most are inclined to think that bitcoin is nothing more than a product of pyramidal financial schemes or simply a speculative bubble.
In order to answer this question, you need to know a number of fundamental factors that determine the nature of bitcoin. This is a currency, a payment system and a transaction protocol in one bottle. There is no consensus yet. But in the history of finance, a similar phenomenon occurs for the first time.
The most understandable explanation for the success of the first cryptocurrency was given by Tom Lee, an advisor to the investment fund Fundstrat Capital. In his opinion, the growth of bitcoin is explained by Metcalfe's law. According to this law, the utility of any network is proportional to the square of the number of users of that network. And the number of supporters of bitcoin as a social network is now growing day by day.
Despite fears, bitcoin is gradually entering the legal field. Japan was the first to recognize bitcoin as a payment unit. Other states also declare the possible full or partial legalization of cryptocurrencies.
HOW THE PRICE OF CRYPTOCURRENCY IS DETERMINED
Unlike the dollar, bitcoin is highly volatile. Today, the rate can conditionally hold at the level of $ 7000, tomorrow it can calmly fall to $ 5500, and in a few days it can restore positions again. What is absolutely unthinkable for traditional currencies is quite normal in the cryptocurrency market.
What explains the high volatility of bitcoin quotes? Andreas Antonopoulos, the Bitcoin financier and evangelist, often draws the analogy of a ship in a storm. If a small boat gets caught in a storm, it dangles along the waves. However, if a cargo ship gets into a storm, the waves do not bother him, he calmly goes on course.
WHY BITCOIN IS NOT A FINANCIAL PYRAMID
Definition of a pyramid scheme given by the US Securities and Exchange Commission (SEC).
The American regulator defines a pyramid scheme (Ponzi scheme) as a form of investment fraud, which involves the payment of estimated profits to existing investors from funds collected from new investors. The organizers of the Ponzi scheme often attract new investors with promises to invest the collected funds in projects with a high return on investment and minimal risk. In many Ponzi schemes, instead of full-fledged investment, fraudsters are busy raising new funds, with which they make the promised payments to early investors and appropriate some of these funds for personal use.
Cryptocurrencies, in turn, have a very wide range of applications. Moreover, the cryptocurrency market is practically unregulated, which attracts a lot of scammers who want to cash in on a popular topic. Therefore, many alternative cryptocurrencies today are indeed forms of pyramid schemes. Most often, the price of such cryptocurrencies is based solely on speculation and deception.
This does not mean that all cryptocurrencies are fraudulent. Some forms of alternative cryptocurrencies have a clear pricing model. The issuing companies of these cryptocurrencies back up their real value, which they create. In my opinion, cryptocurrencies such as Ether, DASH, Tether, Ripple, Litecoin, NEM, Monero really create value.
There is always a central link in a Ponzi scheme - the stakeholder. Bitcoin is a form of protocol for making, verifying and storing financial transactions, built on the technology of a decentralized database - blockchain. The blockchain is devoid of a central link and is only a technical basis for conducting transactions, storing information about them.
Bitcoin creators do not attract new users and do not pay out profits to past users. They also cannot use investors' money for personal gain. This is technically impossible - the bitcoin code is in the public domain, anyone can explore the logic of the network.
Thus, it is impossible to give an unambiguous answer whether cryptocurrencies are financial pyramids. It all depends on the particular case. But Bitcoin definitely does not fall under the definition of a financial pyramid!
10 FACTS EVERYONE SHOULD KNOW ABOUT BITCOIN
Mining farm Bitcoin
Today, the complexity of bitcoin mining is such that using, for example, your computer or laptop for mining is unprofitable for two reasons - scanty computing power (those same gigahashes per second) and the cost of electricity. For example, a laptop, AMD E-350 1.6Ghz \ 3 GB \ 128 MB video will generate one BTC coin for over a year!
BITCOIN FUTURES, WHY ARE THEY NEEDED
Futures is a financial derivative or otherwise a derivative that allows for deferred trading. In this case, the parties agree in advance on the price of the asset and the timing of its delivery. Futures are often thought of as a standardized form of forward.
In essence, futures is the tool that allows traders to carry out bearish trading, or as it is also called, trading to a fall. This makes futures the most common type of derivatives.
In the case of Bitcoin, a futures contract allows you to buy or sell a certain number of coins at a certain price within the period specified in the contract.
Since the buyer has an obligation to purchase Bitcoin in the future at the contract price, the seller, for example, can use futures when he expects the value of the cryptocurrency to decline.
When the price of Bitcoin reaches a level lower than that specified in the agreement, the seller will make a profit. He can purchase the underlying asset at the market price in the previously sold volume, and keep the difference in rates as a profit. In the event that the price of the underlying asset has not reached the level of the contract, the buyer receives a profit, since he takes the cryptocurrency at a price below the market price.