Bitcoin overview  for beginners

Bitcoin overview  for beginners

Astronomical growth in the value of Bitcoin and innovative technologies raises the hype in every corner of the Internet.

Bitcoin. This is a term that you have surely heard here and there over the past few years. But what does it mean? Why does the hype not subside?

Bitcoin overview  for beginners

 

Bitcoin overview  for beginners

I first learned about Bitcoin being a university student back in 2011. They talked about him in a technical blog, where it was boldly stated that Bitcoin would become the money of the future, but he faced some significant obstacles on the way to this. I remember reading that one of the main problems of its universal adoption was the public condemnation of Bitcoin. It was mainly used for illegal online purchases of drugs and weapons. But, despite this and many other obstacles, the author tried to convince his readers that Bitcoin was a good investment.

The information spread widely after Bitcoin reached a climax in its history – one Bitcoin began to cost $ 1. For all enthusiasts, this was a clear confirmation that Bitcoin had a chance to enter the mainstream. Four months later, the price soared to $ 31.

Recently, for one Bitcoin began to give $ 1o000.

If I invested in Bitcoin worth $ 175 after reading this article in 2011, today they would have cost $ 1 million.

That’s why you’ve heard so much about Bitcoin.

Okay, Bitcoin is a huge financial opportunity. But what is this?

The entry in Bitcoin’s blockade is a general record of the person who owns bitcoin.

Bitcoin is a form of digital money that can be sent via the Internet to anyone anywhere in the world.

It’s safe in the sense that there is a public record of who owns each Bitcoin, and this record is copied to thousands of computers around the world.  you will understand this ).

Each time the Bitcoin moves from one address to another, it is displayed in this entry. You can not hide the operation secretly if someone has already sent the Bitcoin, because the record is visible to everyone, and once you send it, the transaction will be recorded and everyone will know that that bitcoin is no longer yours.

Why Bitcoin something worth it?

Bitcoin solves some important problems and opens up new opportunities that are not currently feasible for traditional currencies. Here are a few examples:

  • Bitcoin can be sent to anyone anywhere in the world in minutes. The fee for the transfer is incredibly small, and you do not need to use banks ( ie, someone to trust ) to do it;
  • Bitcoin does not require that you trust the person at the other end of the transaction. If Bitcoin appears in your digital wallet, then it belongs to you. Thus, you do not need an intermediary who confirms the transaction and takes a payment for it;
  • Entries in Bitcoin, solutions, and changes ( how it works, changes in the network protocol ) are decentralized. This contrasts with centralized governments and banks, which can be manipulated by a relatively small number of people. Since the database of how many bitcoins is on which address is stored and works on computers all over the world, neither side can manipulate bitcoin to satisfy individual desires;
  • Bitcoin is extracted. But not in the traditional sense. This process is called mining. Bitcoin’s miners use powerful computers to solve complex mathematical equations.  The first miner who solves the problem receives a reward – Bitcoin. In the entire history of the Bitcoin’s existence, only 21 million Bitcoin can be produced. This creates a shortage and the relationship between supply and demand, which can not easily be manipulated (by “pre-printing” an arbitrary amount of money). Deficiency is a valuable tool, which is why things such as gold and silver cost as much as they cost;
  • Bitcoin-community is one of the strongest and most committed to the idea on the planet;
  • If online stores accept bitcoins for payment, they can serve customers from anywhere in the world;
  • Japan legitimized bitcoin as a means of payment, and more than 260,000 stores in this country are taking Bitcoin. Inhabitants of Japan annually spend about $ 2.6 trillion on the purchase of things. If only 10% of these transactions will be in bitcoin, then only the Japanese bitcoin market could justify the current price of bitcoins. It is estimated that the current price of bitcoin is still too small compared to the potential that it has if people around the world start using it regularly.

What are the problems of bitcoin?

It all looks too good to be true. Is it really so?

You probably heard that Bitcoin is criticized as much as praised. Many of these criticisms are true, and many are not. Here are a few:

  • Bitcoin cannot handle multiple transactions. It’s right. Bitcoin handles an average of 5 transactions per second. Visa is about 2,000. To handle transactions around the world and be viable for everyday use, Bitcoin will most likely need to be able to handle the equivalent of 100,000 transactions per second. Fortunately, many different solutions are developed and offered for scaling without compromising Bitcoin’s famous security;
  • Bitcoin can be hacked, and I will lose my money. This is partly true. While Bitcoin ( as a network protocol ) did not have a single major hacking in his entire life (with the exception of errors at an early stage that was quickly corrected and did not lead to the loss of any significant amounts of money), many software products and The companies (which are centralized add-ins over the Bitcoin protocol) were hacked . Since public records in Bitcoin’s blockade are almost impossible to damage, you do not need to worry about that someone has money in your wallet (the money you keep on your own, if you do not trust anyone )in this way. What you need to do is be careful and watch out for where you keep your Bitcoins. Bitcoin-exchanges are favorite targets of hackers because they store private keys (passwords) from your Bitcoin along with the keys of everyone else, and if the exchange is hacked, an attacker can often access and immediately transfer to his addresses all stock exchanges. In addition, sending Bitcoin to the wrong address (which is easier than you think!), Will lead to the loss of your money. The company, which will create a simple and safe way to store and send bitcoins, will become one of the most valuable companies in this space. Currently, ( for customers from the US ) Coinbase is the most affordable and reliable method, but they still have a long way to go.
  • Governments can ban it and thereby kill its value. This is partly true. While governments can not control where you send your bitcoins, they can make it illegal to sell or buy things for them. Recently, China has closed all bitcoin-exchanges in its country, while developing rules for bitcoin and other currencies. This had a serious short-term impact on the price of bitcoins, as people realized that governments can make it more difficult to use bitcoins (since then the price has already risen). Although in Venezuela, where officials tried to ban the bitcoin mining, it is one of the most effective ways to make money (along with the gold farm in Runescape ), and people continue to do it, despite the pressure from the local authorities. While many central banks and governments fear Bitcoin and the destabilization that he can bring, many support him and seek to understand his capabilities;
  • Smart people call Bitcoin “fraud” – The fact that people call it fraud is true. But they are mostly misinformed. Perhaps the most common objection to bitcoins is that it does not have intrinsic value(the value exceeds its price). But the banknote $ 1 also does not have it. Banknote $ 1 was previously provided with gold, which gave it a second level of value. Now, this is not so. $ 1 costs only $ 1 because people agree that it costs so much. The value of a currency depends on the collective belief in the good faith of the government. In fact, when paper money was introduced in the late 19th century, many skeptics had the same arguments against them as the current skeptics about Bitcoin. If you read their objections and replace “paper money” with “bitcoin,” you will find that the opinions of the speakers are almost identical. This happens at any time when there is a financial revolution. Many people feel that they will have to lose a lot if their way of life is violated, so these people spend so much energy on the struggle. Next,
  • The ethereal and other crypto-currencies will surpass Bitcoin. This may be true. But at the moment no one knows the future, and it is extremely difficult to assess the reliability of such an outcome. Bitcoin is a living currency. It is constantly developing and improving, and it has proved very adaptable. All decisions are made on the basis of consensus between the miners and Bitcoin users. But that’s how his strengths become his weaknesses. Neither side can grab the steering wheel and control Bitcoin to make it applicable to a particular use case (for example, use to buy products). Other crypto-currencies are subject to more control over the developers, which allows them to quickly introduce new functionality to use coins than Bitcoin. The most important thing is that Bitcoin is moving in the direction of adoption by users. Nothing else comes close to the level of awareness and total value that Bitcoin has, and while Bitcoin -community will remain strong, active and (mostly) not politicized, Bitcoin will remain the leader in the foreseeable future

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