The term Bitcoin is abbreviated as BTC, which firstly came into being back in the year 2009.The founder of Bitcoin is known as “Satoshi Nakamato”, who came up with the notion of Bitcoin in order to deal independently in the market.
The BTC is considered as a digital or virtual currency that has no physical shape, rather the value of it is used in terms of transactions. Bitcoin carries the same function as paper money does, but so far it is called digital currency, it is not under the control of any dominant body rather it forgoes the need and power of any intermediaries or entities exerting on any market transactions.
Bitcoin is famous for its largest market capitalization in the world. It basically runs through blockchain platforms and is being traded by blockchains and exchanges. It is Peer – to – Peer (P2P) system in which the decentralized assets can be traded as independently through direct insights.
Lastly, in simple words, the Bitcoin can be defined as the digital currency that values any of the market assets and for which it could be transacted autonomously at any exchange that supports blockchain technology.
The Bitcoin – BTC could be accessed using the multi-chain App by clicking the given link Bitcoin.com Wallet app, which is considered is the most trusted site followed by millions and trillions with the view that it is safer and easier for buying, selling, trading and managing the Bitcoin – BTC of the most famous and groundbreaking Cryptocurrencies.
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Table of Contents
How can Bitcoin be Differentiated? And what Does it Make?
Bitcoin can be defined as a decentralized digital asset which means that it is a digital currency which mainly uses the technology of the blockchain network and accommodates the transactions of users among the users on a decentralized network.
The above figure explains the Bitcoins that what it comprises and how it makes as a whole:
Decentralized:
This means that Bitcoin assets BTC and its platform are both decentralized, no third party could exert the power on it, and users can trade and transact it on its own part.
Digital:
This means that a Bitcoin has no physical shapes, rather it gives a value to transactions and assets and it can be managed through websites and intangible platforms.
Valuable:
Bitcoin acts as digital assets meaning that Bitcoin carries the same function as traditional assets do, but Bitcoin gives a digital value to these assets such as cash, gold and real estates etc.
The arrival of bitcoin BTC into the market came with carrying two functions both as money as well as it carries the function as storing the value of the assets.
The above picture shows the Bitcoin functions both as money and as a store of value for different assets which are explained above.
The above picture explains that Bitcoin removes the need of intermediaries which means that it removes the power of intermediaries which were acting as regulatory and exchanger of the transactions of the users. But the invention of Bitcoins got rid of the need for them, rather the transactions of Bitcoin uses decentralized block chain technology in which users have full insights to all the things. Bitcoin for transactions is a reliable and trustful platform. In addition, removing the need of intermediaries not only free the transactions from any regulatory power but also it reduces the cost of transactions such as these intermediaries plays the role between users not in a free but charge them for transactions fees, thus the invention of BTC has also removed off the extra fee charges cost between the users.
The above picture shows the role of third parties among users’ transactions. Bitcoin plays a role similar to physical cash based transactions. It means that in a cash transaction the participants directly communicate and exchange the transactions by executing the deal with giving money in lieu of assets to acquire, similarly the Bitcoin allows the users to communicate and execute the transaction without using any third party rather finalize it with full authority in a vivid way. The mere difference in the cash transactions and bitcoin transactions is this, that cash is printed based on the demand and supply in Central banks but Bitcoin is created programmatically and the value of this made as 21 Million units and more than this, just based on its demand in the market.
The above graph compares the Money Supply in Dollar Denomination with Bitcoin supply based on based on years. The Bitcoin BTC is forecasted as 21M supply since it emerged 2009 till 2140, whereas the money supply was found to be 21 Trillion from a long span of years from 60s till 20s.
What Things Give Value to Bitcoin?
As explained above, there are majorly two aspects from where bitcoin got popularized and got the stuffiest value. But these two aspects are interconnected with each other.
The first aspect is its features and the second feature is its network effects.
Since Bitcoin was introduced with unique features such as connected users without depending on intermediaries and users could have full authority while transacting deals. Similarly, Bitcoins has also gained value due to its network effects, meaning that network technology has captivated the users with its unique features.
The above picture shows that the two aspects which have given enough value to Bitcoin are its features and its network effects. As it is commonly accepted that when a demand for a thing increases it network automatically boosts up.
For instance, in the traditional past era when for a telephone network there was few people who were in use for telephone and a network for that was also not that valuable when the now there are more people who use telephone so the network has also got increased and got value, the similar is now happen with Bitcoin, while it was new emerged the network has not got that value, since now it has got much familiar in the realm of finance thus it got huge network and value. The below example in figure could easily understand the phenomenon.
The history of money arose from the concept of goldsmith. In the very far years back, people used to complete their needs by giving things in return for another thing and hence these things
were using as mode of money in exchange of transaction. As time passed, the gold was then using as money. As the gold was in time has got enough value with its valuable features rarity, durability and divisibility. These features then gave enough value to the gold as it was storable also giving value to exchanging. Due to these features, the gold as a use of money has now enough value and universally accepted with so far extreme value.
The Bitcoin also carries as similar attributes as gold does which are as followed:
The BTC has limited supply as it is defined that there will only be 21 Million bitcoins, which means that no else bitcoins be created, only these will be serving in the market for valuing different things as money. Being its rarity and has more demand gives bitcoin enough value.
Since, it’s marketing concept, when things are rare they have value and when they are easily and sufficiently available those have less value because it could be available.
The above graph shows the rarity of dollars and then its availability over time. It is shown in the above graph that a Dollar in the era 1913 has value in 2020 equal to 26.14, then overtime similarly a dollar in 1933 has value 19.91 dollars, and overtime it has more value comparing to making value of them in year 2020, but when in the year 2020, the same one Dollar then become similar to as one dollar because the dollar become widely available and it scarcity finished in the market. But unlike to this Bitcoin has the same value till now as since emerged because of only limited availability.
Easily Divisible:
This is the feature of Bitcoin similar as Gold, thus it is easily divisible in parts like one bitcoin can worth is equal to millions and billions of dollars. One bitcoin can be divided into pieces like one Bitcoin equal to hundred million pieces similar as a currency which is divisible of 100 cents. This simply means that 21M BTC could never be finished out in the world as it is divisible in smaller to smaller points that a smaller piece of it could have huge value against other things. As the concept of mere a small piece of a bitcoin could easily be understandable from the below graph.
Bitcoin is Durable:
The another function of Bitcoin similar as Gold, is that internet made the world as global village and since Bitcoin could be available a network or blockchain network independently to the worlds, so due to this bitcoin has no chance to lost, thus it can assure that the bitcoin is durable. The below graph shows the network of Bitcoin which means that it cannot be lost.
These were the Bitcoin features same as gold, but there are many more which are as follow:
Bitcoin is Portable:
The Bitcoin is portable in such a way that on single click or with Nano minutes, the amount of Bitcoin can be sent to anywhere in the world. The below graph compares the portability of Bitcoin and the Gold.
Easily Verifiable:
The bitcoin could be verified more easily as compared to that of Gold, Bitcoin when used for a transaction could automatically verified its authenticity. There is no scams inherent to the transaction of Bitcoins where Gold has its scam history, but the verifying method is shown in the below picture.
Bitcoin has Stronger Network Effects:
Though, the Bitcoin was emerged in 2009, is far newest than Gold based on History, but the Bitcoin has got higher value from its network and digitalized feature with the help of scale and speed of internet. Due to this internet, the possession and the network of bitcoin with people since 2009 till date has in millions. The bitcoin is comparatively captured enough market then gold and the gold has static market capitalization since it carries from so long. The below graph shows the literal worth of the two, the gold and the Bitcoin since the bitcoin emerged based on market capitalization.
How Bitcoin Works?
Let’s first check the money that how it appears in the ledger of banks. The banks has ledger of deposit, withdrawal and balance. The deposit column what comes in the bank account of an individual and withdrawal shows what the individual extract from the account and the balance shows the amount of difference between deposit and withdrawal on each instance. Let’s have a look on the below graph to better understand the concept of the bank ledger.
The above graph understands the ledger system of a bank that keeps the cash system of people and for this the people must trust the banks or financial intermediaries that these transactions are recording accurately. But unfortunately, banks ledger has some flaws of keep the accounts of big companies and their reconciliation system with those entities.
Similarly to banks, Bitcoin has also ledger system but it is decentralized ledger which in a sense that one can easily have verification of transaction of bitcoin on nodes by himself without the inclusion of third party. The nodes are the people who use bitcoin platforms and these transactions on bitcoin ledger could be easily verified from its ledger on its nodes.
The bitcoin is that’s why reliable platform that transaction on this platform could be added but not be edited or subtracted means one to one transactions on nodes.
The added transactions are done through block. This block is connected with another previous block that makes a chain means a blockchains that have record of every single block even till the very first and last block transaction record as chain. In simple words, the new appended transaction on ledger of Bitcoin has connection its previous block which make unbreakable chain. The below graph shows the easiest concept of these blocks and its chain.
The trust of strangers to agree on a thing in order to execute transaction for, was matter of question from so long that the people only relies on only the third parties or intermediaries but the arrival of Bitcoin has solve this question in practical way.
This network of Bitcoin runs with some defined rules that making sure the balance of another nodes and not spend more than that which secures ones against another. The rules of bitcoin that it can be created newer and can’t be used which already used. For every transaction the bitcoin must be created which appends to the network on nodes and added to the chain. The below graph shows the better understanding of a transaction with bitcoin and its chain and its verification process on nodes. It is shown that all the nodes for a transaction is connected and it
can be traced to the very first node from where the transaction initially took place. The node confirms the users one another reliability also that whether to transact with or not.
It must be agreed for the nodes in decentralized networks that the transactions are valid prior to execute transaction that can be added to the ledger of bitcoin. The agreeing process of nodes is known as consensus. Few and many consensus mechanism are there in the realm of cryptocurrency but the Bitcoin uses the Proof of work consensus (PoW).
The Proof of Work ensures the method to reach at consensus, and it works as to force the participants to make sure that they have proven calculation that require some energy (work). The spending of energy requirement is vital as it forms it extremely difficult for bad participants in order to participate in the bitcoin market.
The group of people who are busy in proof of work of bitcoin means engage in calculation of bitcoins are called “Miners”. The mining of BTC is the process of creating a new bitcoin, which is a pivotal part of network’s system for reaching out at consensus means reaching to agreeing on truth without dependent to another centralized authority. The mining was also important for ensuring the network security. The below picture shows the entire cycle of a transaction of bitcoin.
Who Controls Bitcoin?
The rules decided for bitcoin decision and from where the Bitcoin basically emerged, are answered in below explanations.
The Bitcoin is open-source protocol software that was invented by the founder Satoshi Nakamto, with the aim that this software could be easily run by anyone in the world and owing to which most of the people have been contributed and contributing so far since 2009. The people or group of people who use this software voluntarily are forming bitcoin network. The protocol for bitcoin can be changes but it will affect the huge span of people than mere those who run this software. This huge group of people include the larger group of people who holds the bitcoin, those who use bitcoin for their businessman and the developers of bitcoin through mining and all others who stake the bitcoin. As a whole these people or group of people decides and depicts that what actually bitcoin is.
Why the Bitcoin Exists? and Is It Really Needed?
The bitcoin exists because it offers the same function as money and it is an alternate form of digital money that people have in banks and other financial intermediaries. But the bitcoin comes with some unique features as that it removes the need of any third party inclusion between the users. Yes it was needed in a sense that in such a technological world, people were not safe on depending the old traditional system. It brought the most easiness for both the bigger and the smaller. This digital asset, the bitcoin is not invented by any nation or states rather it is invented with a mere concept independency, lower cost of transaction and the reliability by being personally involved in every transactions that could be traced through nodes with previous chain – the block chain which is being created by appending every new transaction.
Is the Bitcoin Legal?
Yes, the bitcoin is almost legal in most of the countries, and mostly legal in all western countries where there is speech of freedom is liberal, the westerns’ consider bitcoin simply as open source platform for transaction not more than that. Whereas on the other hands, in some of the countries, it is tried to ban the use of bitcoin but because of its decentralized nature, it was impossible to completely ban the use of bitcoins.
Can the Bitcoin be stolen?
The bitcoin is extremely secure but need to take into account few and a very few precautions in order to be safe from external penetrations. These precautions are don’t mistakenly send the bitcoin the hands of hackers, to wallet that could easily being hacked or stolen.
Could the Bitcoin software have Bugs?
The bugs were found in the past but they didn’t result in troublesome and were easily fixed. As the bitcoin receives huge popularity, most of the attackers have been trying to put bugs and disturbs but so far nothing discovered creating problem. If unfortunately any bug found, the participants of this decentralized network could sort it out before the bug reach to the exploitation, ensuring by them that no funds are stolen or hacked.
Can the Network of Bitcoin be Hacked or Shut Down?
In order to shut down the Bitcoin network would need to shut down the entire global internet and electricity which is far much Impossible.
As for as the hacking concern, this could be technically merely possible if the entire bitcoin network is take over, but doing so no regulatory and no anybody in the world could pay the cost for it as it is explained above that it values a lot for penny part of Bitcoin. And the hacker won’t do so even, as this is widely decentralized distributed network.
Wrap-Up About What is Bitcoin
To Summarize Up the above detailed explanation this article would really answer all the questions about Bitcoin – BTC. It is a digital asset that captures the entire world’s concerns regardless of being legal or not legal but as it uses a decentralized blockchain network it can benefit the participants from a single and smaller(an Individual) to a larger and bigger(Companies etc.).
