The term “bitcoin” was first coined in 2008, August. “What is bitcoin?” This question still haunts a lot of young investors across the world. The term was coined by two programmers named Satoshi Nakamoto and Martti Malmi who registered a new domain named bitcoin.org. In October 2008, Nakamoto released a document which is also known as a white paper. This white paper was titled “Bitcoin: A Peer to Peer Electronic Cash System.”
But this was not the case that all of a sudden this term was made public, there were some incidents which took place earlier in order to introduce this term. Before bringing all of this on the public domain, Naka moto and a group of volunteers had tried to reach out to people through email threads and various forums. In 2008 all of these came together and then it was given a proper shape.
What is Bitcoin According to the “White Paper”?
It is very important to understand what is bitcoin according to the White Paper. Here we refer to the “Bitcoin: A Peer to Peer Electronic Cash System” as the White Paper.
Well, this paper was studied by financial experts and technological experts and they have said that the paper laid out some principals of bitcoin. It was found out to be an extraordinary electronic payment system that would not require any central authority to control it. But the interesting fact would be that the payment method would be more secured than any centralized payment method.
In other words, this is a kind of a new form of currency that will be used to send money to people without any trust. There is no centralized source controlling such transaction, not there is any need for any trust. This system allows two users to send each other some money, without even trusting each other. This anonymity that is a feature of Bitcoin is not a primary feature of the bitcoin, it is just a byproduct of the currency.
When did the first Bitcoin Exchange take place?
The first bitcoin transaction took place between Nakamoto and late Finney who were the owner of the computers and were also the developers of cryptocurrency.
Let’s Dig More – What is Bitcoin?
Bitcoins have no physical appearance, they are not like Dollars and Euros. Bitcoins are not minted like traditional money. They are produced using computers using some free software and they are held electronically in programmers named wallet.
The smallest unit of bitcoin is called “satoshi” probably named after the invented Satoshi Nakamoto.
1 Bitcoin = 0.00000001 Satoshi
This means that if one does not wish to send a 1 whole bitcoin, then they can send fractional money which is in the form of satoshi.
“All bitcoins are Cryptocurrencies, but not all cryptocurrencies are Bitcoin”
This means that bitcoin is a type of cryptocurrency but not all cryptocurrencies are bitcoins.
Possible Interpretation of “What is Bitcoin”?
Generally, when we hear or ask people about what is bitcoin, we get to hear two kinds of interpretations. Some not even know any of them, but let us see what are are the two interpretations that people make out of bitcoins.
Bitcoin as a Token – This is a common term heard by many of the bitcoin users, which means that it a key to the unit of digital currency. A bitcoin is essential held in a bitcoin wallet which has a typical address combining some alphabets and numbers.
Address Example – “1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa.”
This address would be used by the sender to send the amount of bitcoin he wants to send. There is no conventional facility to choose the name or the banking address of the receiver.
Bitcoin as a Protocol – It is a ledger that maintains the balance of trading some tokens. These ledgers are files that are stored in 1000s of computers across the world. The network records each of the transactions in one of the ledgers and then propagates them to other ledgers of the same version. Once all the ledgers are aware of the transaction and they confirm the transaction then the transaction is permanently confirmed and saved safely in the network.
Bitcoin can be used to make the payment digitally if both parties agree to accept the mode of payment. But transaction in bitcoin is one way, the receiver can not send back the amount again to the sender through the same transaction history. This is why bitcoins are said to be decentralized.
What is “Decentralization” in Bitcoin?
The decentralization method in bitcoin is the main feature of this digital currency. This means that there is no controlling authority like banks have. No government intervention is allowed in bitcoin transactions or any cryptocurrency transaction. The bitcoin process is maintained by a group of volunteer coders and networked by them as well.
Why Use Bitcoin?
After we get to know what is bitcoin, the second question that arises in our mind is that when we have money then why to use bitcoin. Nakamoto actually created bitcoin to make it an alternative payment method which would be less restricting. The most attractive unique selling proposition of bitcoin is that it is decentralized and there is almost no transactional fee included in it.
The most appreciated function of this digital currency is that it is irreversible, which also removes the threat of charge-backs for the merchants. The details of the transaction are encrypted in one’s personal data and it is not shared with anyone.
However, cybercrime is something that restricts bitcoin exchange and threats the availability of the free movement of the currency.
Bitcoin can be sent from one corner of the earth to the other, in just a few minutes. The best thing is that one can send bitcoins in a larger amount which usually the bank authorities do not allow. The transactional fee in bitcoin is as less as just 0%-1% which is usually 3% – 5% in the case of banks.
Also Read: G20 Countries Start Implementing Unified Crypto Standards
However, bitcoin is, however, recognized positively and negatively by the people. Some countries have been benefitted by the use of bitcoin and they have started using bitcoin in everyday life, while some others still find it very inconvenient to use bitcoin, they feel it is illegal or has got to do something with the dark web net.
Bitcoin is an investment and like any other investment, bitcoin also holds some amount of risk. It has become a regular part of an investment portfolio these days.
It has been noticed that a large number of small and big retails have been using bitcoin massively now. However, the demand for the same is much less than it should have been by now. The primary issue being the lack of education about this kind of digital currency.
Many have already started investing on bitcoins, some feel it risky to use it in day to day life, while some others are holding onto it as a part of the investment. The worldwide pandemic has called for a surge in the use of bitcoin. Millions of people have lost their jobs have been looking for some alternative platform to earn money. This gave rise to the bitcoin platforms majorly.