Bitcoin is a digital currency secured by encryption, handled outside the jurisdiction of a central authority. This coin was created in 2009 by a mysterious person who called himself Satoshi Nakamoto, and the coin was essentially introduced to be used for payments that were not subject to government control, transaction fees, or delays in transfers – unlike traditional “mandatory” (paper) currencies.
Back in 2010, bitcoin was about 0,003 cents per currency. In October 2017, the currency rose to the US $4200 – although this value fluctuated, with daily movements swinging and frequent. At this time, hundreds of other virtual currencies
emerged, each with its own advantages and applications. However, a few of these currencies are very valuable, but bitcoin has competitors in the form of ether and bitcoin cash, plus less bitcoin.
Bitcoin is a commodity or a currency?
Bitcoin was initially invented as a method of payment, and in some specific cases, it works exactly as it is. However, they lack widespread prevalence and are currently experiencing major fluctuations that can be seen as a real alternative to paper currency: Vendors need to constantly review their prices to deal with swinging movements in value.
This means that bitcoin is used mainly as an investment that resembles gold and other precious metals, rather than a traditional currency. Like goods, the currency exceeds the direct impact of a particular economy and is not significantly affected by changes in monetary policy.
Remember that while bitcoin is not affected by many factors affecting traditional currencies, there are a number of unique impacts to be taken into account.
How does bitcoin work?
Bitcoin needs two basic mechanisms for action: serial data and mining.
Serial data is a common digital record consisting of all bitcoin transactions executed to date. These transactions are grouped together as “groups,” secured by encryption during mining operations, and linked together.
Anyone can access serial data at any time, and it can only be changed at the will and computing power of the vast majority of the network, meaning that it is almost impossible to make a retroactive modification, i.e. you will not fall victim to human error in addition to not having a single point of failure.
Mining is the process required to secure these groups, and by doing so, new units of virtual currency are issued. These units are known as “group bonuses.” In the case of bitcoin, the reward is currently equivalent to 12.5 bitcoin, though that splits in half every four years or so.
The role of the mining participant is to carry out this process by solving complex algorithms – an ongoing task that can be easier or more difficult. By adjusting the complexity of the algorithms, persons involved in mining ensure that the processing time of the groups is kept roughly stable. Given their critical role in the network, bitcoin is largely dominated by mining participants, especially since mining is now an important business.