The world of finance is increasingly exciting and promising, when we see innovations in the area of commercial exchange, fast transactions, which are increasingly booming and with greater security and transparency. This is how we see the emergence of digital or virtual money, called Bitcoin as the digital currency with the greatest boom and credibility so far worldwide.

What is bitcoin?

We see that this digital currency has caused a furor in the world of transactions and finance in general. Bitcoin is a consensual network, it is an electronic payment system that was announced at the beginning of 2009, and which allows as payment method a fully digital currency. It is considered the first network between decentralized payment pairs, which is driven by users without having a central authority or control of any intermediary. This means that Bitcoin is money online.

Satoshi Nakamoto: its creator

It is said that its creator was Satoshi Nakamoto, but in reality no one knows him or anyone is clear about him. It seems that it is a pseudonym used by a group that developed Bitcoin and that for security measures they prefer to remain anonymous. This supposed group has decided to remain in the shade, and it is justified, because it is something that has put the bank to think about the immense repercussions that it would have worldwide in a short time, would be able to totally change the way of doing Commercial exchange in the world.

Bitcoin network control

No one has control of the technology behind email and in this way Bitcoin has no owners, which explains that the control is exercised by its own users around the world. Thus, even if the programmers make improvements to the software, they cannot force a change in the Bitcoin protocol, since all other users have the freedom to choose the software and the version of their choice.

And for compatibility with each other, all users need to use software that conforms to the same rules for everyone. Thus, for Bitcoin to work correctly, there must be consensus among all its users. Said more clearly, all users and programmers have a great incentive to protect this consensus.

Bitcoin operation

From the user’s point of view, Bitcoin is nothing more than a mobile or desktop application, which provides a personal Bitcoin wallet, allowing the user to receive and send Bitcoins through it. That is how simple Bitcoin works for most users. If we are located in a recording studio, we can say that behind the cameras, this Bitcoin network shares a kind of public accounting called Blockchain, which contains all transactions made and processed, which allows verifying the validity of each transaction.

The authenticity of the transactions is protected by digital signatures that correspond to the shipping addresses, and thus allows users to have full control when sending Bitcoins from their Bitcoins addresses. Also, any user can process a transaction using the computational power of specialized hardware and thus get rewards in Bitcoin for performing this service, this is what is called mining.

To verify transactions

These virtual currencies contain as part of their information the Bitcoin address of their owner. Thus, if we send a quantity of Bitcoins to another person, the public key of that person will automatically be added to the Bitcoin network and in this way it will be signed with the private key, giving validity to the operation. When making the transaction, the issuer notifies the nodes of the Bitcoin network that are connected at the moment, so that they give it validity and then they can relay it to other nodes, until they all get to have the updated information on the balance.

Social and economic implications for the future

Once the technological basis of the operation of Bitcoin is known, (blockchain technology) it is convenient to know about its social and economic implications soon. Bitcoin is a currency that has high fluctuation with respect to its exchange value. It is currently in the upward trend, and well pronounced. There have been times when it loses its value, with ups and downs that are repeated in very short periods.

This process is interesting, for people who want to buy Bitcoins in the present to sell them in the future, speculating their value. If the system survives, Bitcoin is expected to gain value, especially as we get closer to the maximum number of 21 million coins issued and those in circulation.

Although we must be aware of the risk involved, we know that this is a technological and financial experiment that is just being born. The transactions are pseudo-anonymous, and sometimes it is difficult to track reliably, which seems something positive for everyone’s privacy, could be used by some organizations for money laundering, drugs, buying and selling weapons, etc., so that could become a double-edged sword with fatal consequences.

In short, we are in the presence of a software experiment, with the goal of becoming an economic revolt that could change the way of buying and paying in the near future. Only the future will indicate whether the decentralized, free and pseudo-anonymous P2P transaction system will have a place in the society in which the large banking corporations have had the power and now exert pressure to try to curb this type of digital market.

What do you think about this topic? What catches your attention the most about bitcoin?

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Image from TheDigitalArtist via Pixabay.com under a creative commons license.


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