What Is Bitcoin and What Is Used For?

What Is Bitcoin and What Is Used For?

The world of cryptocurrency has been here since 2009, when Satoshi Nakamoto created the first cryptocurrency called Bitcoin. What is Bitcoin? Simply defined, bitcoin is a digital cryptography-based currency. Satoshi Nakamoto is a software developer based in Japan, but no one really know Satoshi is. He proposed the new cryptocurrency as an electronic payment system, which is based upon mathematical proof. The idea behind Bitcoin was to provide a means of exchange, in which no third party is involved, as well as a means of secured financial transaction in a verifiable and immutable way.

What Is Bitcoin: Cutting through the Confusion

Actually, there is still some confusion about what is bitcoin. Actually, the word “bitcoin” refers to two separate components. The first is Bitcoin-the-token. This refers to a snippet of code, which represents a unit of value and ownership of digital assets.  The second component is Bitcoin-the protocol. It refers to a distributed network, which consists of balance ledger of bitcoin-the-token.

When it comes to the first component (bitcoin-the-token), bitcoin is treated like a currency. However, it is different from traditional currencies in the following ways:

• Decentralized system. Unlike traditional banking system, which is controlled by the financial institutions like bank, the cryptocurrency is not controlled by any financial institution. It is maintained by an open network of computers around the world. No single entity controls the system.
• Limited Supply. The bitcoin is produced by means of cryptography-based algorithm. The supply is limited. Until now, the supply of bitcoin is limited to a maximum of 21 million. When the limit is reached, no more digital coins will be produced. As a result, value of the existing coins will keep increasing since the demand increases with time.
• Immutable transactions. One a bitcoin transaction is validated, no one can modify it anymore. There is no “return” instruction to return the money. Once the transaction is recorded on the network, it is impossible to modify it.

• Pseudo-Anonymity. Users of the computers in the bitcoin network works in a semi-anonymous way. The users may choose to display or not to display their real name, as it does not influence the transaction. Bitcoin transaction is checked and verified through the system.
• Bitcoin is a digital currency, which has no physical or printed forms. It is controlled by an open ledger. Everyone in the network can see the transactions, but only the people, who are making transactions, can verify it. This system eliminates the need for commission fees, account fees, or transaction fees associated with conventional banking system.

What Is Bitcoin Used For?

Just like conventional currency, Bitcoin is used for digital transactions. The system allows two people to send and receive payment without involving a bank.  The bitcoin can be used just like the way fiat currency is used. The owners can book hotels, shop for computer software, online gaming platform, buy concert tickets, shop for furniture, and many more as long as the merchants or vendors receive payments in Bitcoin.

With Bitcoin, international payments become easier and cheaper, as they do not involve any third party commission. Use of bitcoin for international transactions is increasingly wider, as more and more businesses realize the security and increasing value of the digital money. However, make sure to check financial regulation related to cryptocurrency in your country since not all country has such regulation.