When Bitcoin was introduced to the world by the group of people who created the currency they explained to everyone that this currency was known as a decentralized digital currency. They went on to claimed that it would allow people to send currency around the world in real time without the need of a third-party to perform the transactions. This meant that you no longer needed PayPal, Visa or even a bank to transfer currency anywhere in the world.
Bitcoin is actually separated into two separate components. The first component is the bitcoin-the-token that is actually a snippet of code that represents the ownership of the digital currency. You can think of this as a virtual IOU. The second component of Bitcoin is the bitcoin-the-protocol. This is the network that distributes and maintains all the ledgers of balances for the bitcoin-the-token. When you combine the two together, you now have Bitcoin.
Bitcoins are not a printed currency that you can take to a market to buy merchandise, but instead, they are a currency that is produced by computers worldwide that use a free software. As the concept started to grow and people started to invest in electronic currency people started to characterize this currency as a cryptocurrency.
The developers of Bitcoin explained the system as an electronic payment system that was based on mathematical proof. The idea behind Bitcoin was to produce a new means of exchange that was independent of any central authority. This gave people the chance to transfer currency electronically in a secure environment that used a verifiable and immutable way to complete the transactions.
The world still has no idea who actually developed Bitcoin. Some claim it was a single man that called himself Satoshi Nakamoto. While other indications show us that it was a group of software developers that came up with this idea and developed the program. The members of the group called themselves Satoshi Nakamoto.
Bitcoin has grown in popularity for the simple reason it is decentralized. No single institution or government controls the Bitcoin network. Instead, the network is maintained and controlled by a group of volunteer codes that are run on an open network. The network is maintained by groups of dedicated computers that are spread around the world.
Bitcoin has solved the double spending problem of electronic currencies. In the electronic fiat currencies that banks control the digital assets can be copied and re-used. Banks around the world have control over the traditional system. However, with Bitcoin no-one has control because the transactions are distributed by an open network.
With Fiat currency, a bank can print as many dollars, euros, yens or whatever currency they choose. There is an unlimited supply of Fiat currency that a bank has. The problem with this system is that banks can manipulate the value of this currency. This is a problem for the holders of this currency. They are the ones who bear the cost in the end.
The supply of Bitcoins is tightly controlled by an algorithm. Each hour a small amount of Bitcoin is produced. This will continue on until the cap is reached. Once 21 million Bitcoin has been produced it stops. The supply and demand of Bitcoin are very attractive. Since there is a cap on how many Bitcoins will be produced, but there is no cap on the demand of this currency. Therefore, as the demand grows so does the value of Bitcoins.
As an owner of Bitcoins, your identity is kept secret. There are no governmental agencies that need to verify who you are. Furthermore, there are no controls set in place demanding that you prove who you are when purchasing Bitcoins. Therefore, this makes the Bitcoin currency ideal for criminals, money-launderers, and terrorists. Your identity is kept a secret when making all transactions online.
Bitcoins are broken down into units. The smallest unit of a Bitcoin is called a satoshi. The Satoshi is one hundred millionth of a Bitcoin or 0.000000001. This Satoshi is worth around one-hundredth of a cent. The Satoshi conceivably enables microtransactions possible where traditional electronic money can’t perform these types of transactions.