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Understanding Bitcoin and other virtual currencies

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The massive increase in Bitcoin value has captured many people’s attention. Some countries have also thought about regulating this virtual currency. However, this hasn’t been easy because Satoshi Nakamoto created Bitcoin to democratize financial systems globally.

Bitcoin is more than a mere cryptocurrency that Satoshi Nakamoto introduced Bitcoin in 2009. It’s also a financial system with several components. Perhaps, an essential aspect of Bitcoin is that no corporation, government, individual, or organization owns or controls it. It depends on a peer-to-peer network and cryptography.

Some countries have tried to create virtual currencies to rival Bitcoin. For instance, China a digital asset known as the Central Bank Digital Currency. Simply put, CBDC is a virtual currency that the central bank of China issues to the citizens. The government has authorized the Yuan Pay Group to distribute this cryptocurrency. A successful allows you to access this virtual currency and use it within the law.

While the world has over 4,000 cryptocurrencies, Bitcoin remains the dominant virtual currency. However, some people don’t know much about this digital currency.

Bitcoin Definition

Some people define Bitcoin as a form of anonymous, digital money. Bitcoin definition may describe it as a virtual, electronic, or digital currency created by an unknown entity called Satoshi Nakamoto. However, Bitcoin has a transparent blockchain that any user can inspect at will. And this contradiction makes many people realize the financial freedom that comes with using this virtual currency. Essentially, Bitcoin provides indiscriminate access to a modern, decentralized monetary system.

This virtual currency has a protocol that lays out its financial system’s rules, including the number of units that the world can have, their creation process, and transfer among users. Changing this protocol is not easy because participants must reach a consensus.

Bitcoin software is a program that participants us to verify individual transactions and rules. This software comprises nodes or miners that use cryptographic proofs to secure this network. What’s more, the system pays the miners for verifying transactions. And that’s how people mint new Bitcoins.

The Bitcoin Impact

The idea behind Bitcoin is to use cryptography in controlling the transfer and creation of money instead of depending on central authorities. Bitcoin’s success has spurred the creation of other digital currencies. Some of the electronic currencies that have had some popularity and success include Ethereum, Dash, Monero, and Litecoin.

Some cryptocurrencies died because people were not interested in them. Thus, nobody uses these virtual currencies. People use the term Altcoins to refer to non-Bitcoin virtual currencies collectively. However, the basis of these electronic currencies is less or more a similar decentralized exchange medium idea.

The success of virtual currencies relies on the total transactions’ value they slosh about the virtual economy or peer-to-peer network. Being open-source means anybody can have Bitcoin using this technology.

Causes of Bitcoin boom

People have used Bitcoin for over a decade now. The Cyprus economic crisis was among the factors that caused its earliest spikes. Most people realized that cryptocurrency provided an appealing method of storing value or money with constant access.

What’s more, the limited Bitcoin’s number means inflation can’t happen with this virtual currency. And this intrigue caused an increase in Bitcoin’s demand. But the question about the number of people using Bitcoin as a payment means and those using it as an investment remains.

The increasing number of individuals who want to make quick money from purchasing and selling this virtual currency causes a bubble burst. While few outlets or merchants accept Bitcoin payments, people want to own this virtual currency because they think its value will keep rising.

Nevertheless, Bitcoin needs a broader adoption and acceptance as a payment method or exchange mechanism. Until it achieves this, it will remain a volatile digital asset.


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