First of its kind Bitcoin – the cryptocurrency, is a digital currency which can be passed on between users on a bitcoin network without any centralized bank or administrative system.
What many people do not know is that there are two parts to Bitcoin – Bitcoin token and Bitcoin Protocol, both of which are called Bitcoin. Bitcoin token is a fragment of code that symbolizes the digital concept. Whereas Bitcoin protocol is a network registry that keeps track of the Bitcoin token balance sheet. Bitcoin transfers are verified using cryptography.
Bitcoin was founded in the year 2008 by Satoshi Nakamoto whose true identity is not known until today. A year later in 2009 a free software with Bitcoin code was made available on the internet and that is when Bitcoin was started. The moto behind creating Bitcoin was to have an entity that is free to exchange with no centralized administrative body having control over it. Although there is no centralized authority involved in Bitcoin transactions, the transfers are done in a secure and reliable way.
Key features of Bitcoin
Limitations in supply
Unlike the traditional currencies, which have endless supply, bitcoin does not have that luxury. For the regular currencies, a central authority issues the currency based on the demand of its users (local citizens of its respective country) to reach the overall market of its value.
Bitcoin on the other hand has an algorithm that keeps check of the amount of Bitcoins available. This algorithm generates bitcoins hourly until the count reaches 21 million. After the desired number of bitcoins are out in the market the algorithm stops running. This is a way to increase the bitcoin value when there is more demand.
Bitcoin transactions are not worried about your true identity, the details like address and name are not asked for verification at the transaction. This is because Bitcoin is not issued by any central authority that maintains a database like in the case of fiat currencies.
Then how exactly are the transactions secured? Here is the answer. Right after a bitcoin transaction is submitted and prior to sending a confirmation, bitcoin protocol looks at the last few transactions for details on the sender’s authority to make a bitcoin transaction and if the sender has the bitcoin required for transaction.
However, as a usual practice lately all the secured exchanges are validating their users by their wallet. New rules are being laid out by the governments, for the exchanges to thoroughly verify the user details and their payment options before allowing any Bitcoin transactions. This has increased the visibility on transactions thereby decreasing the fraud on Bitcoin usage.
Divisibility and units
Bitcoin units are called bitcoin. Satoshi is its smallest unit. Named after its creator a satoshi is 0.00000001 of a bitcoin (one hundredth million). Bitcoin is represented symbolically as BTC and XBT. Sometimes smaller units of bitcoin are marked as mBTC – millibitcoin. 0.001 bitcoin equals a millibitcoin.
Unlike the regular currencies, it is convenient to trade in divisions of bitcoin because of its huge value.
Decentralization is the most important characteristic that stands out Bitcoin from other currencies. With no central regulated body available to control bitcoin, it is worked on by volunteers on a network spread across the globe. Bitcoin also solves the problem of duplicates in currencies and in a way controls fraud.
Once done the bitcoin transactions cannot be undone or modified. As bitcoin is decentralized and no one has an ultimate control over its course of action, it becomes almost impossible for any bitcoin transaction to be reversed after an hour.
As inconvenient as it seems, this feature also means no one can ever tamper a bitcoin transaction.