Digital money
Bitcoin was created right after the financial crisis in 2008 through a white page or white paper written by an entity or a group of people under the pseudonym Satoshi Nakamoto. The crisis has been as an incentive for the development of Bitcoin, and in this article you will find out how long Bitcoin has existed, why it was created and what is its usefulness.
The financial crisis of 2007 and 2008, also known as the subprime mortgage crisis, was a global event that led to the significant contraction of liquidity in international financial markets (which began in the United States) due to the collapse of the housing market.
As the world plunged into a global recession, the white paper laid the groundwork for the first fully functional digital money based on distributed accounting technology (DLT) called blockchain. So, what is Bitcoin and how does it work?
Bitcoin’s white paper was the first document to lay out the fundamentals of a cryptographically secure and reliable peer-to-peer (P 2P) electronic payment system fundamentally designed to be censorship-resistant.
Bitcoin is digital money, also known as cryptocurrency, that operates independently of any central authority. Cryptocurrency is a digital medium of exchange that secures and verifies transactions using cryptography. Bitcoin was created as an alternative to existing fiat currencies (vouchers) with the aim of eventually being recognized as an international currency. Fiat money such as the dollar and the British pound are controlled by the respective national government in terms of supply and creation due to demand.
The fundamentals of Bitcoin
There are several key features of Bitcoin that make it stand out against traditional money or other assets. Bitcoin’s unique combination of many factors is what makes it stand out.
Decentralized
Bitcoin is the first financial system to successfully use a fully peer-to-peer network. It does this through blockchain technology as invented by Satoshi Nakamoto. The decentralized nature of Bitcoin helps us in so many ways.
First, it increases network security. In a centralized environment, if a computer is compromised, it just ends there the game. In a decentralized network like a blockchain, one will need to attack so many different computers, where in the case of Bitcoin this makes it almost a superhuman effort.
Moreover, within a decentralized network there is no central authority-entity that can dictate everything that happens on the network.
Finally, there are many actors worldwide involved in the Bitcoin network. Therefore, the network is fully operational 24/7. Also, anyone can register on the network anywhere and at any time.
Transparency & interoperability
As mentioned at the beginning, Bitcoin is completely open source. This means that anyone can take a closer look at their coding and verify how it works. All transactions are also publicly available on the blockchain, which means that you can verify all the data associated with the Bitcoin accounts and balances.
Resistance to censorship & full ownership
With Bitcoin, there is no central authority that could tell you what you can and cannot do with your own money. Unlike the money you have left in the care of a financial institution, through Bitcoin you can have full control over your own funds while maintaining full ownership of your money. While there are options to leave it under someone else’s tutelage (e.g., cryptocurrency exchanges), there are equally safe options to have full ownership of your own funds.
Anti-inflationary
Unlike traditional money that can be printed unlimitedly, Bitcoin is encoded in such a way that there is an absolute maximum of 21 million Bitcoins in 2140. New Bitcoins are still being produced at the moment, but the amount generated is halved about every four years at an event known as ‘halving’ ” (by half) of Bitcoin.
Anonymous
While Bitcoin transactions are fully public, they also remain anonymous. The addresses used in Bitcoin are a series of data that alone cannot lead to an individual person. Moreover: nowadays you can use a function known as Hierarchical Deterministic Keys or HD. This ensures that every time you use a specific Bitcoin address, you can create a new address under your control to send new funds. As such, no one could know your total balance.
Lightning-fast transactions worldwide
Bitcoin transactions can be shipped from anywhere in the world to any country. It does not take into account the borders of a country while a national or international transaction requires the same time and fees. On average, a BTC trade takes about 10 minutes to complete. It specifically negates international transactions where traditional bank transfers can take between 1 and 4 business days.