Bitcoin is a relatively new concept. Because it among other things is a technological thing, for most people, it becomes something strange and even terrible. And although every day more and more people understand the value of electronic currencies Bitcoin, and in particular, many just need to explain what is the essence and how this thing works at all. That is what we are going to do in this material.
What is Bitcoin?
This is an electronic currency. It is a means of payment of the new format. This new approach to the conservation and transmission of values. In essence, functionally, bitcoin and other counterparts in the technology, do not differ from the usual dollar or the euro: you have a purse, which stores money (bitcoins), you gets and sends the seller or just another human being, and in return receive the goods or service. The main difference is, where are the money and how to work with them.
This is a digital currency, and “digital” electronic means. To work with digital things, whether it is a normal program like Word or music in MP3 format need special devices – computers, phones, iPods, etc. To work with the same bitcoin need a computer, telephone or other device which can read the program (code) of a special type.
Yes, in fact it turns out that Bitcoin – it’s just a code, a set of characters (rather long), in which certain information is encrypted: the number of Bitcoin, the owner at the moment, creation date, etc. But the most interesting and really different from other real bitcoin currency is as follows: for each code that have any owner, contains information about all bitcoins in the world. In other words, once the world there is a new bitcoin or he passes from one hand to another, it will recognize all the other owners of bitcoins and information in the code of each unit is updated.
This system ensures that it is impossible (or insanely difficult) compromise bitcoins and “copy” or create a false version. It’s like trying to take a popular book with millions of copies and try to sell it to the other main characters. Instead of Harry Potter do Vasya Pupkin.
Another distinctive feature of bitcoin, which makes the currency like gold, that the main way to the appearance of new units in circulation – is mining. As gold is mined from the earth, knowing that at some point the stocks run out, and with Bitcoin.
However, it is not extracted with picks and shovels, but with the help of computers and special mathematical calculations, counting each new bitcoin. And the number is also very limited – 21 million bitcoins, that’s all you can get. With each passing day it becomes more and more difficult and costly – like gold.
This is another distinctive feature that makes bitcoins like gold – the ability to be divided into smaller parts. A kilogram of gold bullion can be sawn to 100 grams or even gram. Bitcoin divide and thousands, and millions share, the benefit that the purchasing power is, even in such small particles.
But there is one detail that makes a unique electronic currency – it really combines the real physical world and the digital space. If the gold is in essence we extract and use only in the real world, the Bitcoin we produce in the digital world, but we can bring in the real.
Like this? The fact that this is, as mentioned above, simply code. A code can be printed in a specific format, as the bar code on the box of cereal (called QR-code). Print it out on paper, you can then enter into the computer or phone, read the code from the paper and again to get these bitcoins in digital form. This is in essence – a spare copy of the digital wallet in the real world.
All this allows to make bitcoin a safe and reliable tool. However, it is worth saying a few words about how to really use it. By itself, Bitcoin is the piece of code.
To something they pay for that code with some amendments need to send to the seller. This is done through special programs. In the real world, it can be compared to online banking interface or with a person at the post office that receives a parcel from you, you are talking to someone go-mail, and then pay the fee. And then the letter goes to the right place.
Bitcoin works on the same principle, except that the difference is that the fee if there is (even when transferring directly this is not), then they are minimal. To communicate between each other, channels need network and transportation system.
It is called Blockchain. It is this structure to take care that the funds were sent to the addressee, rewrites the present owner and provides security (including updates on new Bitcoin and their owners).
Let’s face it – how it works Blokcheyn you do not need to understand. You do not ask how e-mail from China gets into your home mailbox? You just waiting, when will come posting. Here as well – it’s built and operates the scheme.
It should be here to say such a thing: the electronic currency Bitcoin whether it or its competitors, taking over the world and become a convenient and permanent means of payment. They allow for a high degree of confidentiality, are very fast, protected against tampering. This new round of currency as a phenomenon, and even today the government considering to adopt the experience of creating these things for dollars, pounds, euros, etc.
However, in Bitcoin has its weaknesses – and although they can be stored in the physical world, yet they are very dependent on electricity, and the existence of certain infrastructure. As to whether people trust this currency. Since real “physical” applications like gold and dollars in Bitcoin no, they’re both quite strongly dependent on trust. But in contrast to the dollar, and the like, bitcoins are independent of governments and credible in themselves, rather than as a promise of a ruler.
Therefore, pay attention to electronic currency, but do not consider them a panacea – it is just a new, yet not too popular and this is enough competitive tool. Enjoy the moment.