Virtual money Bitcoin, what it is, advantages, disadvantages. What is virtual currency, its advantages and disadvantages

Bitcoin (BTC) is the world's first decentralized digital currency. This currency is fundamentally different from all previously created electronic currencies and payment systems. It is not tied to any physical assets or "official" currencies, and the price of the digital coin - Bitcoin - is governed solely by market supply and demand.

Bitcoin is a worldwide payment system through which transactions with this currency can be carried out. Its main difference from traditional payment systems is that the Bitcoin system does not have any management or processing center - all operations take place exclusively in a network of peer clients.

At the end of October 2008, subscribers of the gmane.comp.encryption.general resource received a message from a sender named Satoshi Nakamoto. The message contained a description of the essence and properties of the created cryptocurrency called Bitcoin.

It was explained to subscribers that the new virtual currency is reliably protected from fraudulent transactions, does not depend on any organizations, and provides the opportunity for its owners to use it anonymously. All information about the new cryptocurrency was also posted on bitcoin.org.

However, the history of bitcoins, or rather the prerequisites for its creation, were known much earlier. Even 10 years before Bitcoin appeared, the advantages of creating an uncontrolled cryptocurrency were described by Neal Towne Stevenson in his novel. And researcher Nick Szabo worked until 2005 to create the Bitgold electronic money system. He argued that the virtual currency would not be subject to inflation. In addition, it will be impossible to fake and steal.

Key Features of the Bitcoin Network

There is no concept of “registration”; anyone can participate in the network.
A Bitcoin wallet is not tied to the user’s identity; anyone can create an unlimited number of wallets and details.
Cheap, anonymous and unlimited money transfers around the world.
There are no intermediaries, digital money is directly sent between users.
It is impossible to block a transfer, freeze money in the user’s wallet, or “roll back” already completed transactions.
Bitcoins can be stored on your computer, on your smartphone, in an online wallet, on a special device, or in a secure safe.
There is no controlling organization, the price of Bitcoin is determined only by market supply and demand.
The release of bitcoins is strictly limited and predictable; it is impossible to “run the printing press” and create many bitcoins.

Thus, Bitcoin simultaneously has the properties of ordinary cash, electronic currencies, a money transfer system and “digital gold”.

The essence of the Bitcoin cryptocurrency in simple, understandable language

This is a new generation of decentralized digital currency, created and operating only on the Internet. No one controls it; currency is issued through the work of millions of computers around the world, using a program to calculate mathematical algorithms.

Essentially, Bitcoin is an ordinary computer program. Only it is not located on any single computer or server, but on millions of computers at once, which directly communicate with each other through this program.

Torrents work on a similar principle. You install a program on yourself, and someone else does the same. You can then transfer files directly to each other, without the involvement of any servers, and with virtually no control. It is this feature that has made torrents the main breeding ground for piracy on the Internet.

The Bitcoin system works exactly the same way. The only task of this program is not to transfer files between users, but to give them “virtual glasses”.

The main differences between Bitcoins and classical money

Bitcoins are not backed by anything

BTC are not debt obligations (like traditional money) and, in fact, are not backed by anything material. The price of bitcoins directly depends on supply and demand, i.e. How much do people need currency? A parallel can be drawn with gold, the price of which directly depends on demand. If at some point no one needs gold, then the price for it will collapse, although the price will not fall to complete zero, because It’s still metal and you can make something out of it. If there is no demand, nothing can be made from Bitcoin, so its price could theoretically fall to zero.

There is no single center

As I said above, all payment system data is stored in open code on the media of system users. There is no system regulator (such as the central bank) who could influence the price of the currency, the quantity of new units issued, and other factors.

Limited amount of currency

The source code of the system is programmed in such a way that the maximum number of coins in the system is initially known (21 million coins). Not only the maximum quantity is programmed, but also the dynamics of the issue (the release of new coins), which is now 25 coins every 10 minutes. Coins are distributed among the so-called miners, who ensure the functioning of the system with the provided computing power. Every 4 years, emissions are halved.

Thus, the payment system has a deflationary structure, which contributes to a constant increase in the price of the cue ball.

How the Bitcoin system works

For a general understanding of the basic principles of the Bitcoin network, watch this video:

To understand in more detail all the details of the Bitcoin protocol, you can watch this video with a more complete technical description of the network’s operation:

Bitcoin Blockchain Principles

Decentralization.

There is no central network control authority, the network is distributed among all participants, each computer that mines bitcoins is a participant in this system. This means that no central authority has the ability to dictate rules to Bitcoin owners, as, for example, was the case in early 2013 in Cyprus. And even if some part of the network goes offline, the payment system will continue to operate stably.

Limitation.

The supply of bitcoins is limited (by definition), its extraction is complex and labor-intensive (it is carried out by miners), and it cannot simply be taken and printed in the required quantity, like ordinary money. According to the algorithm that ensures the viability of the cryptocurrency, no more than 21,000,000 bitcoins can be mined, after which their mining will stop. It is difficult to predict what this will lead to, but if there is no financial collapse, the cryptocurrency will simply remain in circulation and will periodically change its rate.

Easy to use.

You need to go through seven steps of hell to open a current account for a company in our banks, and maybe you will be refused without explanation. For Bitcoin this is not a problem, you will need 5 minutes to create a Bitcoin wallet and start using it immediately. No questions asked, no fees.

Anonymity.

Yes Yes. It is completely anonymous and at the same time completely transparent. You can create an infinite number of Bitcoin addresses without being tied to a name, address or any other information. However, see the next point.

Transparency.

Bitcoin stores the entire history of transactions that have ever taken place, this is called a sequential chain of blocks or. The block chain knows everything. Therefore, if you have a publicly used Bitcoin address, then anyone can see how many Bitcoins you have in your account, if you have not reported that this is your address, then no one will ever know that it belongs to you. For complete anonymity, they usually use one Bitcoin address for a single transaction.

The commission is negligible.

Your bank can easily write off a $50 fee for international money transfers. Bitcoin - no. Although in 2017, due to the geometrically increasing number of transactions, the commission increased significantly.

Translation speed.

You can send money anywhere and to anyone, it will arrive in a matter of minutes after the Bitcoin network processes the payment.

Irrevocable transactions.

Once Bitcoin is sent to the recipient, it is impossible to return it. Only if the recipient himself does not want to do this.

The most frequently asked questions about Bitcoin

Who created Bitcoin?

The developer of the program calls himself Satoshi Nakamoto, he proposed an electronic payment system based on mathematical calculations. The idea was to exchange coins without any central authority, electronically, more or less instantly, at the lowest possible cost.

But who prints bitcoins?

NOBODY. This currency is not printed by a central bank and does not operate under its rules. Banks can print as much money as they want to cover the national debt, thereby devaluing their currency.

On the contrary, the emission of bitcoins is possible only in digital form and anyone can start mining or, as they say, mining bitcoins at any time. Bitcoin mining occurs by using the computing power of a computer in a distributed network. When transferring bitcoins, the transaction is processed by the same network, thereby turning bitcoin into an independent digital payment system.

How many Bitcoins can there be?

There is a limitation in the Bitcoin code; a maximum of 21 million bitcoins can be “mined”. Despite this, Bitcoin can be divided indefinitely into smaller parts, it’s a digital currency! 1 satoshi is 0.00000001 btc (named after the creator)

What is Bitcoin backed by?

National currencies used to be backed by gold or silver, now they are backed by GDP. Theoretically, you could go to any bank in the country and exchange your paper money for the equivalent of gold and back. Bitcoin is not backed by anything, it is pure mathematics.

Anyone around the world can run a bitcoin mining script on their computer and feel like a mini-Central Bank. The source code of the script is published in open form, everyone can see how it works.

Bitcoin is an intangible digital currency and a special type of payment system. You cannot hold this money in your hands, but you can pay with it when making purchases in online stores. Transferring bitcoins from user to user is sending encrypted data.

This cryptocurrency is based on two qualities - absolute anonymity and reliability of intra-system transactions.

Bitcoin (BTC) is not associated with banks, states, or gold reserves, since it is only a set of symbols obtained as a result of solving a problem. As conceived by the creator, its rate can only be influenced by demand, which is deliberately limited.

According to the created algorithm, the number of BTC cannot exceed 21 million units. Virtual coins appear gradually, and the process of issuing them should approximately be completed in 2140. The basic principle of the existence of this currency is the constant calculation of an encrypted function.

A user who decides to create new bitcoins installs special software on his computer. The ultimate goal of numerous settlements is to create a decentralized free currency. This process was called “mining” (mining). Mining is based on a cryptographic algorithm that converts data into a bit string.

Attitudes towards Bitcoin in different countries

Does cryptocurrency have a chance to be in circulation alongside real currencies or can it be treated as a game? There is no definite answer to this question yet. Most economists are skeptical about this money. They consider them a bubble, noting that the value of bitcoins increases due to speculation, but the volume of its actual use for trading does not change. Some financiers consider cryptocurrency transactions to be akin to a financial pyramid on a global scale.

However, if you can buy something with virtual currency, then to some extent it can be considered a means of payment. Thus, the German Ministry of Finance defined the status of Bitcoin as a “unit of financial accounting,” that is, it recognized it as a type of cash. In the United States, a federal court ruled that military-technical cooperation meets the concept of money.

The first ATM is already operating in Vancouver, Canada, where you can exchange bitcoins for traditional national currency and back. It is noteworthy that in the first week of operation of the exchanger, transactions amounting to more than 100,000 Canadian dollars were made.

But in some countries the new currency is not recognized. It is completely prohibited in Thailand. China, which previously had a favorable attitude toward bitcoins, has banned financial organizations from any transactions involving them since February 1, 2014. But such a ban was not introduced for individuals.

The French Central Bank also spoke disapprovingly of cryptocurrency. The regulator issued a press release in which the new currency was called a speculative and risky instrument. In Russia, bitcoins were even called money surrogates. This was stated in the official statement of the country's Prosecutor General's Office. Representatives of the department stated that the official monetary unit of the Russian Federation is the ruble, and the use of monetary surrogates is prohibited by the current legislation of the country.

The reasons why financial regulators in certain countries do not consider virtual money to be legal tender are obvious. This currency does not have an issuer, so there are no formal grounds to classify it as securities or banknotes. It is also difficult to call it a payment system, since there are no licensed operators who manage the turnover and bear legal responsibility.

No financial organizations are involved in making payments in Bitcoin. Payments are made directly and it is not possible to cancel the payment. Information about the payment made by the payer is distributed throughout the network and is accepted by all other participants if the payment complies with the rules. An incorrect payment will be rejected. There is usually no fee charged at checkout, but it may be voluntarily paid to speed up the processing of the transaction.

Addresses are anonymous and do not contain information about their owner. The address consists of text about 34 characters long. It includes numbers and letters of the Latin alphabet. Bitcoin addresses can be represented as QR codes, as well as other 2D barcodes that can be read by mobile devices. A Bitcoin user can create multiple addresses on his own initiative.

Acquiring a new address involves creating a new key pair, and does not even require a network connection. Obtaining an address for only one correspondent or for one transaction enhances anonymity. The storage of funds is the wallet file located on the computer. They can be transferred to any user using a Bitcoin address.

Based on the properties of the Bitcoin system, it is compared to gold. The Bitcoin resource is limited: the more bitcoins are mined, the more difficult it is to mine further. The resource cannot be copied; theoretically, the value of coins only increases over time. But virtual bitcoin is different from physical gold. You cannot buy something twice with the same coins. Cryptographic protection and the system algorithm will not allow this. The advantages of cryptocurrency, in comparison with gold, include the speed of transactions. The operation can be initiated even from a mobile phone, being at any distance from the recipient, the payment will be made in a few minutes.

Hundreds of services and stores already accept Bitcoins as payment. There is an opinion that, just as at one time e-mail limited the functioning of traditional mail to a minimum, and Skype squeezed out telephone companies, Bitcoin will be able to take its place in payment systems.

Perhaps virtual money will compete with the usual money circulation. Traditional currency has long become an unbacked paper and is printed in any volume. Moreover, this process enriches some people and devalues the share of other owners of “candy wrappers”, of whom there are much more than the former. But it is still impossible to accurately predict the development of Bitcoin.

How is the Bitcoin rate formed?

The rate of BTC and other cryptocurrencies is formed on specialized exchanges, based on supply and demand, as befits any such asset. However, due to the rather low overall capitalization of the currency, it is heavily influenced by large players and mass panic. This is clearly visible on the cryptocurrency exchange rate charts.

Bitcoin is absolutely not protected from speculation and is subject to strong volatility. For example, in 2013, its rate increased from $30 to $240 as a result of the banking crisis in Cyprus. Subsequently, quotes exceeded $1,240. In just 2013, the exchange rate increased by 9500%. But in December the “bubble” burst due to prohibitive sanctions in China. The rate dropped to $400. Since 2014, Bitcoin began to grow steadily. In mid-February, the rate reached $620.

Almost every owner of several tens of thousands of military-technical exchanges can, using the general confusion and excitement around what is happening, collapse or raise the market. Local and global Bitcoin pumps occur regularly and will continue to occur as long as people are willing to buy and invest their savings.

The BTC exchange rate, like any other currency, increases with increased demand. When players are ready to buy, it gradually increases. A sharp rise in the exchange rate does not so much mean an explosive interest in the currency as the arrival of a pump bull on the stock exchange.

Players with large assets (pumpers) can quickly buy sell orders and raise the rate to the maximum value in the shortest possible time. Pumpers create the appearance of a stable growth in the exchange rate, provoking newcomers to buy. By arranging a dump at the peak of activity, they dump their assets. The Bitcoin rate drops to its lowest levels.

Popularization of the currency through advertising and good news also causes the cryptocurrency to grow. The more users are informed about a product, the more they will want to invest money in it or play on the stock exchange. Bitcoin is advertised in all media around the world, which contributes to the growth of its rate.

Experienced traders are good at recognizing rate changes such as correction, loss and fall. A correction is a gradual increase or decrease in the exchange rate after a sharp fall or increase. However, if a correction in a certain period of time is observed on all exchanges with large trading volumes, this may mean that an instant loss is coming.

A drain is considered to be a sharp drop in the exchange rate of 15% or more. A drain is triggered by bad news, a dump or panic, such as restrictions related to cryptocurrency in China. By fall we mean a medium-term moderate decline, as a result of which the price of military-technical cooperation decreases by no more than 5-7%.

Correction and rebound (a sharp short-term change in the price of Bitcoin in the opposite direction) happen almost constantly. When playing on corrections and rebounds, the only serious problem is not knowing the minimum level of decline in the cryptocurrency rate (bottom) at which you should buy.

A drain (dump) is an action planned in advance by large players, which is impossible to foresee, but theoretically can be anticipated. A long-term dump, lasting several days, usually ends in a flush. As a rule, the upcoming leak is foreshadowed by contrived negative news, escalation of the situation in chats and the desire of pumpers to create panic in the markets.

It is quite difficult to predict the fall or rise of the Bitcoin rate without having serious assets. However, you can protect yourself from falling into a negative stream and avoid losing all your money. It is necessary to closely monitor dynamics, trends and news. Constantly analyze the situation, do not be afraid to make thoughtful decisions and even lose money, but at the right moment.

The cost of military-technical cooperation is not backed by any organization or government. Like other currencies, Bitcoin is worth something because people are willing to exchange it for services and goods. But its rate constantly fluctuates. Investing in Bitcoin is quite risky. At an early stage, the system lacks widespread adoption and is therefore quite vulnerable.

Supporters of the system do not deny that no one promises money, the nominal value of which is provided and guaranteed by the state (fiat). The liquidity of cryptocurrency is not guaranteed by anything. Its non-speculative value is provided only by those goods or services that can be purchased with bitcoins, and does not depend on the global commodity supply. The more people want to use the new currency, the higher its rate will be.

Perhaps later, when Bitcoin is more well known, its stability may increase, but right now price changes are quite unpredictable. Investing in cryptocurrency should be carefully considered, with a clear risk management plan in place. The deflationary model of military-technical cooperation itself assumes an increase in the exchange rate over time, but this is not guaranteed by anyone. Therefore, you should not invest your last savings or significant amounts of money in Bitcoin.

There are two options for investing in bitcoins. In the first case, money is simply invested in Bitcoin in the hope that the exchange rate will rise. In the second, profit is obtained by speculating on fluctuations in the value of Bitcoin. Bitcoin speculation can only bring income to players who understand trading. The cryptocurrency rate is characterized by exchange rate changes of tens and even hundreds of dollars per day. If the exchange rate movement is correctly predicted, the profit can be quite substantial.

Prospects for Bitcoin

Many doubt the viability of Bitcoin. Much in the system is incomprehensible and resembles the famous financial pyramids. In fact, the developers of the program are unknown. There are a variety of assumptions about who is hiding under the pseudonym Satoshi Nakamoto. The rules for issuing bitcoins gave clear advantages to the first users of the system.

In 2013, generating a block required half a million times more operations than at the beginning of the system. The task becomes more complex and requires much more resources and costs, while the reward has decreased. The differences from the pyramids in the system are, of course, significant. MMM-type structures are based on a referral program. Profit is made only when new participants are invited. Bitcoins are earned regardless of attracting new users. On the contrary, as the number of participants increases, mining becomes more difficult.

The number of participants in the Bitcoin network is relatively small, although it is the leader among cryptocurrencies. After the sharp rise in Bitcoin prices in 2011, other similar systems appeared: Namecoin, Litecoin (LTC), Novacoin. But they have not yet been able to achieve the popularity of Bitcoin. These currencies are traded against BTC and have the same rate movements. Many experts are distrustful of digital currencies and consider them to be a kind of pyramid scheme. Some suspect that these systems are “groping the way” to the creation of a new world currency that should replace the dollar, which has lost confidence.

Although the number of merchants willing to accept cryptocurrency is growing, its share in the global economy remains microscopic. This speaks of Bitcoin more as a fashion trend than as a real means of payment. It is possible that the number of virtual currencies may increase in the near future (there are already several dozen of them), but in the future there will be no more than three to five of them. Their rates will be extremely unstable, and the likelihood of recognition is low. It is impossible to say today whether Bitcoin will be among them.

Cryptocurrency is a new generation of virtual money. Their history is not even 10 years old, but economists talk about them as a new generation currency. According to them, cryptocurrency on the Internet is already a worthy competitor to fiat money (state currencies), and in the future it will be able to completely displace them from the sphere of electronic payments. These opinions are justified by the fact that now the exchange rate of the most famous digital currency Bitcoin to the US dollar exceeds 1 to 3600. And it is not surprising that among ordinary Internet users, cryptocurrency arouses great interest and a desire to understand what mining is and how to use coins. Let’s take a closer look at the features of digital money and try to explain in simple words “for dummies” what their essence and advantages are and how to earn and use them.

Digital currency: what is Bitcoin cryptocurrency in simple words for dummies

Today, the most famous and popular cryptocurrency is Bitcoin. In 2017, this digital currency is accepted by many online stores, it is traded on the Forex exchange, significant sums of world-famous corporations are investing in it, and the rate of these virtual coins is growing steadily. But in order to use bitcoin, you first need to understand what the essence of this currency is and how it differs from ordinary money.

The essence of Bitcoin cryptocurrency in simple words

The very concept of cryptocurrency comes from the addition of the words “cryptography” and “currency”, so it is obvious that this digital money can otherwise be called a currency, when performing transactions with which cryptography (encryption) methods are used. All electronic currencies exist only in virtual space, so if we explain what the Bitcoin cryptocurrency is in simple words for dummies, we can say that each btc is a digital code. And payments with digital money represent the transfer by the payer of a hashed code of a financial unit to the recipient.

The smallest financial unit in the Bitcoin system is Satoshi. 1 satoshi equals 0.00000001 BTC. Network users can store and accumulate digital finances in BTC wallets created either on the official website of the blockchain.info system, or using other services that are easy to find on the Internet. The user’s account can have any amount - from a few satoshis to hundreds of bitcoin coins or more, and no commission is charged for creating and using the wallet.

The whole truth about Bitcoin in simple words

Settlements between owners of Bitcoin wallets are made directly and almost instantly. There are no commissions or hidden payments in this virtual financial system, so paying with electronic money is very profitable.

Differences between cryptocurrency and fiat money

The main difference between coins and government currencies is the fact that they are not backed by anything, and their nominal value is not guaranteed by any administrative body. In simple terms for dummies, the coin rate is not set or supported by either states or non-state organizations. It depends only on how much the users themselves are willing to buy them for.

Cryptocurrency is issued in a decentralized manner, since this virtual money is not printed, but created by system participants. Therefore, there is neither a single issuer (in simple terms - an institution where there is a machine that prints money), nor a body that controls the issue and circulation of digital financial units.

What is cryptocurrency, its types, and why is it needed?

Despite the difference between digital money and fiat money, its purpose is the same as that of any government currency. The answer to the question of what cryptocurrency is and why it is needed is simple - bitcoins and other coins are a means of payment, accumulation and savings. Despite the fact that this money does not exist in physical form, it can be used to pay for goods and services on the Internet, as well as exchanged for dollars, euros and other currencies in online exchangers or sold on an exchange.

Types of cryptocurrencies

Today there are more than 250 types of digital currencies, but most of them are in low demand even on specialized exchanges. However, despite the difference in rate and liquidity, all electronic finance has a number of common characteristics, namely:

Decentralized emission
Possibility of coin mining by any network user
Lack of a body that controls the issuance and circulation of digital money
Irreversibility of transactions in the system (in simple terms - not a single payment made can be canceled or returned)
Anonymity and high security of the electronic financial system.

In 2017, in addition to Bitcoin, digital money such as Ethereum (Ether), Litecoin (Litecoin), Namecoin, PPcoin and Primecoin are distinguished by high liquidity. But over time, the situation may change, and little-known currencies have a good chance of increasing their liquidity over time. Therefore, people who make money by investing in virtual financial units do not wonder why little-known cryptocurrencies are needed, but buy coins whose value is beginning to rise.

The history of the emergence of cryptocurrencies and blockchain technology

The history of the emergence of cryptocurrencies began in 2009, when the first digital currency bitcoin was created. At the same time, the real name of the creator of this electronic financial system remains a mystery to this day - the programmer or group of programmers who wrote the Bitcoin code is known to the world under the pseudonym Satoshi Nakamoto.

But it cannot be said that before the creation of btc no one used similar technologies. In fact, Satoshi Nakamoto used the “blind signature” and electronic cash algorithms created in 1983, the essence of which, in simple terms, is to maintain the anonymity of the payer while protecting the recipient from fraud.

The blockchain technology that underlies the entire Bitcoin system (and other cryptocurrencies) was created on the basis of the Hashcash anti-spam system, which was developed by Adam Back in 1997.

The essence of blockchain technology and its role in the history of cryptocurrencies

Blockchain technology is a chain of information blocks built according to certain rules and in a strict sequence that cannot be changed in any way. In fact, the entire Bitcoin system is a continuous sequence of blocks that reflect information about all transactions. In simple terms, blockchain is an archive of the entire system in which you can track the turnover of each individual financial unit.

It is blockchain technology that guarantees that counterfeiting bitcoin is impossible in principle. Each coin's code is unique and can be easily tracked in the database, so any fraudulent attempt will be immediately detected.

It is also important that the database is stored decentralized, on the computers of the owners of BTC wallets. This means that in order to hack it and counterfeit coins, you need to have physical access to the PCs of several million people.

Blockchain for dummies

If you are reading this article, it’s easy to guess that you were brought here by your interest in the loudest innovation in the financial world in recent years - cryptocurrencies, and primarily Bitcoin. Let's figure out what Bitcoin is and why there is so much talk about it. And not only on social networks and forums, but also in central banks, special committees and governments of many countries around the world. Join the community and start using new digital money.

Term "cryptocurrency"- a direct translation of the English "cryptocurrency", that is, a virtual currency protected by cryptography. First of all, cryptocurrency is a fast and reliable system of payments and money transfers, based on the latest technologies and not controlled by any government.

Bitcoin, Bitcoin, Bitcoin, BTC

Word "Bitcoin" formed in English from "bit"– the minimum unit of information and "coin"- coin. Following the rules of English-Russian transcription, this term should be translated into Russian as "Bitcoin". This spelling is used by the official website bitcoin.org, Bitcoin Wiki, Wikipedia, the Central Bank of the Russian Federation and other resources. Still a widespread option" Bitcoin" originated from the first translation of the wallet interface based on direct transliteration.
The most common abbreviation for Bitcoin is BTC– usually used in stock trading and financial articles. Cyrillic abbreviation, BTK, did not take root in the community.

What is Bitcoin? This is the first and most famous of the symbol and flagship of the cryptocurrency world, as well as the monetary unit of the same name that circulates within the system. Later in this article we will explain how cryptocurrency works, using Bitcoin as an example.

What is the most significant feature of Bitcoin from an economic perspective? It is a digital commodity with a limited supply, its algorithm is designed in such a way that a maximum of 21 million units can exist in the system, each of which is also called “bitcoin”. The emission schedule is determined programmatically and is known in advance. After the last coins are generated, their number will not change. Bitcoin's economy is built on a deflationary model, which has raised concerns among many economists. But they find no practical justification.

In fact, such a relatively small number of coins is quite enough for everyday payments, since 1 bitcoin is divided into 100,000,000 parts, which are called “satoshi”, in honor of the creator of the system. Sometimes the terms "millibitcoin" (mBTC, one thousandth) and "microbitcoin" (uBTC, one millionth) are used.

Bitcoin emission schedule

Bitcoin began as a concept document published on October 31, 2008 by a mysterious person working under the pseudonym Satoshi Nakamoto. Who the real developer is, one person or a group, is still unknown, despite numerous journalistic investigations. On January 3, 2009, the practical implementation of this concept in program code began. IN 18:45 GMT (22:45 Moscow time) 03.01.2009 The first block in the network, the so-called genesis block, was generated. This day is considered Bitcoin's birthday and is celebrated by communities around the world.

What is the difference?

Features of Bitcoin that distinguish it from other types of electronic and paper money:

Bitcoin mining difficulty chart

Cryptocurrencies in life

Initially, bitcoins were in demand only among mathematicians, cryptographers, and people very passionate about computer and network technologies. Back then, bitcoins simply served as proof that unsecured electronic money was possible. Rather, they can be called an electronic analogue of gold - like gold, bitcoin is difficult to mine, its quantity is limited, and the complexity of mining only increases over time. In the fall of 2009, 1 BTC could already be purchased for 0.8 cents. From then on, the history of stock trading began, in which there were many ups and downs, high-profile bankruptcies and successful projects. Transactions for Bitcoin were at first rare and sporadic. The first and most famous was the purchase, which took place in May 2010 (at that time the equivalent of $25). Since then, the exchange rate has risen above $1000 and fallen back to $150, but that's another story...

Early in Bitcoin's development, the illegal online marketplace Silk Road also created its popularity. Now Bitcoin does not depend on one exchange or pool, and law enforcement officers have learned to deal with illegal activities in cryptocurrencies in the same way as with other economic crimes.

Today Bitcoin is a modern digital currency that is perfect for payments on the Internet. More and more stores as one of the payment options. The simplicity and convenience of opening a Bitcoin account is attracting more and more people from developing countries to this digital currency. In many countries in Asia and Africa, the Bitcoin network is replacing people with difficult and expensive banking services. In developed countries, POS terminals for paying with Bitcoin in stores, ATMs for cryptocurrencies, and hardware wallets for Bitcoin have become widespread. There has been a real boom in startups that use Bitcoin. It turned out that blockchain technology is suitable not only for financial calculations, but also for distributed storage of data about various assets. There are already several thousand created on the basis of Bitcoin or from scratch.

A little about politics

The attitude of states towards cryptocurrencies is very different. There is both clear encouragement - in Japan, Australia, Germany, the Netherlands, New Zealand, Singapore, various offshores - and serious restrictions that can outgrow prohibitive measures - in Indonesia, China, Ukraine. Only ardent Latin Americans in Bolivia and Ecuador decided to implement direct bans.

Many governments have chosen the observation line with cautious optimism - most of the EU countries, the UK and Switzerland, the US federal government, Canada and countries in Southeast Asia. In most developed countries, financial legislation is being adapted to regulate cryptocurrencies, and this issue will soon be resolved.

Bitcoin is the world's first decentralized digital cryptocurrency. The Bitcoin network appeared in 2009. Transactions in the BTC network occur on the peer-to-peer principle, which means the direct transfer of funds from one user to another, without the participation of third parties and regulatory authorities such as banks, the state, etc.

The Bitcoin cryptocurrency is fundamentally different from all previously created electronic currencies and payment systems. It is not tied to any physical assets or “official” fiat currencies, and the price of the BTC digital coin is regulated solely by market supply and demand i.e. there, by what value people themselves invest in it, similar to gold, for example.

Bitcoin has another big similarity to gold - limited supply and total quantity. In the case of Bitcoin, it quantity strictly limited to 21,000,000, while as of 2019, 17,600,000 BTC have already been mined, i.e. more than 83%. And this figure does not take into account all the lost wallets with BTC tokens lying on them, and this happened often before. users were negligent in properly storing cryptocurrency on , due to the fact that the value of the coins at that time was not significant.

Thus, Bitcoin is a worldwide payment system without emissions and inflation, through which you can carry out transactions with this currency. Its main difference from traditional payment systems is that the Bitcoin network does not have any management or processing center - all operations take place exclusively in a network of equal clients without intermediaries (peer to peer network).

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About Bitcoin in simple words (with explanatory video)

In simple words, Bitcoin is one large registry file (for an analogy, you can imagine Exel) where information about all payments and receipts is recorded, while this file cannot be falsified or changed, and the value of the cryptocurrency is constantly increasing due to its limited quantity and the absence of additional emission.

VTS is the very first cryptocurrency that appeared in 2009. For the first time, the principle of operation of the peer-to-peer Bitcoin network, which Satoshi Nakamoto worked on, could be familiarized with two years before the appearance of the digital currency. Despite the fact that Nakamoto managed to attract the attention of thousands of programmers to his project, no one believed in its success at that time.

The first transaction using Bitcoin was carried out by the American Hanecz Laszlo, who offered 10,000 BTC to anyone who would bring two Italian pizzas to his house. It is difficult to imagine what emotions Laszlo experienced at the moment when he began to grow rapidly.

Bitcoin (BTC) exchange rate chart against the US dollar, ruble and euro:

Distinctive features of BTC as a cryptocurrency

How can I get bitcoins?

There are several ways to purchase BTC. However, the process can be fraught with some difficulties. For example, there are a large number of scam sites listing fake coins from other blockchains.

There are practically no free ways to receive BTC anymore. After the rapid growth of the cryptocurrency rate, such services for receiving free electronic coins ceased to exist or switched to a different mode of operation. To obtain cryptocurrency by any method, the expenditure of certain resources is required.

Main ways to receive bitcoins:

- the best way to get Bitcoin in 2019. It is a rental of cloud mining service power in the form of a contract for a year. All cryptocurrency produced by this power goes to your account. On average, income is from 200% to 600% per year, it all depends on the exchange rate and the increase in the complexity of the network. But keep in mind that in cloud mining there are a lot of scam sites or pyramids, you can only trust old and proven services, there are not many of them on the market, for example.
. Those who are engaged in mining, as it were, rent out their hashrate and obtain cryptocurrency by using the computing power data. There are many farms for mass mining of BTC.
. The only free way to get bitcoins, but it takes a lot of time and gives meager dividends. The service user only needs to click on advertising banners and videos, but the cost of the transition is very low, with 2017-2018 this method became completely ineffective.
. You can purchase electronic currency for money at special exchangers, we have a detailed overview of the most popular and reliable ones. Also, some support the deposit and withdrawal of fiat money, but not all.

Principles of Bitcoin and BlockChain technology

The main principle of creation was to create a database that would not have a main server (it would be decentralized). Encrypted copies of this database are stored by all system participants. If we consider Bitcoin, then the base represents all operations performed with this cryptocurrency (mining, transfer, purchase, sale). Absolutely everything is recorded in the database and is available to all participants in the system.
Any new entry in such a database is synchronized with all its copies for everyone who participates in this system. Coordination algorithms come into play. If someone tries to steal something, he will have to replace the data of more than half of the participants in the system, because... Since the network has more than a million members, this is almost impossible.
Each new block in the database contains information (hash) about the previous block, and so on, block by block. This information confirms that the block is intact, not altered or counterfeited. In order to fake a block (payment), you will have to change the entire chain of blocks, which is stored not in one place, but on millions of computers. And to do this you need to gain access to each of them. A pointless and very expensive activity.

With the technology more or less clear, let's move on to the principles that were laid down in Bitcoin:

The release of BTC is limited, the maximum quantity is 21 million. This principle protects cryptocurrency from inflation. At the moment, no one is able to print or devalue them. This can be compared to gold, because... both gold and bitcoins can only be purchased or mined.
is a complex calculation process - enumeration of numbers, in which the hash is specified by a special template. Mining is carried out on computers or special systems (farms). Mining is possible both on your own equipment and with the help of .
The complexity of this pattern is determined in such a way that for any number of miners (equipment in the network), Bitcoin appears once every 10 minutes. Whoever decrypts a block of transactions receives a reward in the form of BTC tokens.
Computers that participate in the mining of cryptocurrency simultaneously provide the ability to carry out transactions in the system, convey this information to all participants in the system by adding and synchronizing this information between databases. All new transactions are confirmed once every 10 minutes, when the next unit of cryptocurrency is mined.
All users of the system have a specific address (cryptographic account) and a secret key, with the help of which transfers from their account to the account of another user of the system are signed. This is similar to a regular e-wallet and password.

Differences between Bitcoin and classic fiat money (rubles, dollars, euros)

VTS is the very first cryptocurrency that appeared in 2009. For the first time, one could get acquainted with the principle of operation of the peer-to-peer Bitcoin network, on which a certain Satoshi Nakamoto worked, two years before the advent of digital currency.

A decentralized currency that is not controlled by any bank or exchange has always been a nightmare for the global financial system. It is scattered around the globe, works only online, is not backed by anything, and every user in the world is able to influence the course without leaving the computer. At the same time, the computing function of the server grows, which in the system can look like a continuous operation.

Electronic cryptocurrency has a number of striking differences from conventional cash and other valuable financial assets.

Bitcoin has the following differences:

Decentralization. There is no central authority to control the network; it is distributed among all computers used for computing resources. The decentralized system uses a special program code that regulates the work of network participants and the emission schedule.
Irreversibility of transactions. Once the cryptocurrency is transferred from one recipient to one of the online wallets to another (for example, webmoney), it cannot be returned to the original account.
Emission limitation. Mathematical algorithms are built in such a way that the generation of coins is closed. The total amount of BTC will never change.
Low commission for transfers. A special feature of Bitcoin is the absence of any intermediaries during the transaction, due to which no commission fee is charged. There may be a small percentage of commission for transactions with bank accounts.
Does inflation affect the exchange rate?. Global inflation is isolated from the financial economy, so inflation does not have any impact on the exchange rate, unlike conventional currencies.

Bitcoin (BTC) in simple words can be described as follows: mathematical calculations that generate the mining process into a small piece of computer code.

Today, there are hundreds of millions of transactions using cryptocurrency. Therefore, we will answer the question “what is Bitcoin” in simple words - money that has its own exchange rate in relation to another currency, but does not have a physical form.

Unlike government banknotes, cryptocurrency cannot be printed. However, this does not mean that virtual coins appear out of nowhere. Cryptocurrency is a digital object that contains a colossal amount of information that has a cryptographic code. Simply put, this is a kind of virtual memory card that has a digital record.

In order to generate a new record, it is necessary to find the only correct solution to a complex mathematical algorithm. Since even the smartest person is not able to cope with such a task, the computing power of a computer is used for these purposes.

Each cryptocurrency differs from each other not only in the uniqueness of the way the task can be used, but also in the total number of possible solutions, which are subsequently turned into coins.

Why is Bitcoin needed and how can it be used?

If you happen to ask these investors what Bitcoin is for, you'll likely only get confused looks and raised eyebrows. Gold, for example, is used in mints, in jewelry, as a conductor for high-precision electronics, and as a material for medical implants.

When determining the range of use of an asset, things are somewhat more complicated. If BTC is a true commodity, its value must consist of more than just the value of an investment instrument. So, what is this asset used for?

As an alternative means of payment

If you spend enough time online, you may have noticed a growing number of projects accepting Bitcoin as a means of payment. Major players in the market, including Overstock.com, Expedia, Newegg, DishNetwork and Microsoft, do not disdain this.

Some companies only accept BTC. Why? Sometimes entrepreneurs do things that go against the grain of traditional financial institutions, be it providing VPN traffic, selling marijuana, or showing adult videos. Since Bitcoin uses a p2p system, such services may not be afraid of blocking their accounts? and their users will become anonymous.

In general, Bitcoin has become quite popular. It is accepted by more than 100,000 merchants online and offline, and their number is growing every day.

As an alternative to a debit card

Bitcoin provides opportunities similar to banking services. In some regions, people already have access to, in which they can withdraw funds from or top up their wallet.

Such cards can become an alternative to debit bank cards. There is even a tangible Bitcoin coin, but it is more of an expensive souvenir than real value, since it can only contain the seed phrase necessary to activate a real wallet.

As a permanent transaction ledger

In January 2009, when Satoshi Nakamoto mined , he left the following note in it:

This reference to the modern banking system reflects one of the core elements of Bitcoin (BTC). The blockchain records all transactions of this cryptocurrency. More importantly, due to the fact that third-party data can be entered into records, the Bitcoin network can be used to exchange information and values unrelated to itself. This mechanism is much better implemented by altcoins like Ethereum, but it was Bitcoin that first proposed this concept.

Instead of fiat currency

Bitcoin is a ready-made solution for those who do not want or cannot use fiat currency, who have lost faith in central banks, live in a country with a deteriorating economy, or in a region where there is no stable currency. Recent extreme volatility aside, the asset currently represents a good investment and a healthy alternative to fiat currency.

Of course, no one knows what the future holds for BTC. However, the use cases described above are valid for now and, apparently, will be valid for some time to come.

Main technical characteristics and features

Bitcoin is a unit of information, a specific piece of computer code expressed in mathematical calculations of computer power. The peculiarity of BTC is that it is an independent digital unit, which is not influenced by other currencies and payment systems; the economy of this network is completely independent.

Technical characteristics of the Bitcoin blockchain:

formation of an information block: every 10 minutes;
block reward: 25 coins;
number of BTC in the world: 21 million;
the complexity of the structure changes: every 2016 blocks (2 weeks).

Open source

The development and introduction of cryptocurrency is carried out with open source code. This means that changes to the structure of Bitcoin can be made by most users.

In addition, the open source code allows any user of a personal computer to start mining electronic money. This approach to development instantly eliminates errors in the system, helps to rapidly develop the exchange network and mine the No. 1 cryptocurrency.

Blockchain technology

A chain of blocks containing information and built according to a certain scheme is called a blockchain. Such a chain of blocks grows and performs the function of distribution and classification of the database. Necessary for conducting transactions and exchange operations with the Bitcoin cryptocurrency.

Blocks are formed simultaneously by many “miners”, after which they go to a special database (blockchain). Blocks contain all the information about transactions and cryptocurrency owners. The number of transactions does not affect the speed of formation of block branches.

Secure transactions using electronic signatures

Electronic signature – what is it in simple understandable words: a password assigned to a new account. When registering on the Bitcoin network, all users are given unique signature keys. Only with their help is it possible to carry out a transaction from your account. In addition, it is possible to create a joint account for several people with a multi-signature. To transfer currency from it, you will need to enter the personal identifiers of at least two thirds of the account holders.

Bitcoin consists of Satoshi

1 Satoshi = 0.00000001 BTC.

There are 100 million Satoshis in 1 Bitcoin. You can send any amount in Satoshi, which makes the cryptocurrency very flexible for use in everyday life.

Answers to the most frequently asked questions about Bitcoin

Finally, we will answer all the most popular questions about the Bitcoin cryptocurrency.

How many BTC are there in the world?

A currency not backed by traditional resources, capable of self-reproduction through the execution of certain programs on the computers of network users, will instantly depreciate. To prevent this, an artificial limit has been created to prevent the number of Bitcoins in the world from becoming more than 21 million.

All these millions are online financial transactions reliably backed by computer power. Currently, 14 million have been mined. Due to the constant complication of the mining algorithm, the issue of the last Bitcoin is expected in 2140.

How does cryptocurrency appear?

Cryptocurrency appears through the efforts of users who use it and allocate computing power to process all transactions. Bitcoin mining - what is it in simple reasonable words, how does electronic cryptocurrency appear?

Bitcoin does not have a transaction processing center, so users take on the task of providing computing processes. For spending the resource of their computer, they receive a strictly defined amount of btc. In total, up to 3,600 units of currency can appear per day.

Who issues BTC?

The emission of Bitcoin is clearly limited, limited; you can intervene in this process only by leasing the computing power of your computer to the system. The people who do this are called miners, and for their services they receive a limited amount of Bitcoin issued daily.

Such an activity is currently beneficial only to owners of large companies and members of large pools. Smaller farms are already struggling to cope with the tasks provided to them by the Bitcoin system.

What is the backing of the Bitcoin cryptocurrency?

Bitcoin - what it is in simple words can be described as a complicated version of the nascent economy of a country with undeveloped gold mining. An unmined resource is worth nothing except a person's promise to buy it in the future.

The use of cryptocurrency is based on the same principle: it appears due to demand, which creates itself. The value of BTC is determined by people’s trust in the system, their willingness to conduct transactions with its help, which causes a financial pyramid or bubble to arise, and this is a negative feature of Bitcoin.

The role of Bitcoin in the economy now and in the near future

In the modern market, Bitcoin has aroused a lot of investor interest; trading using BTC has been launched on the Internet, because by accepting cryptocurrency as payment, the seller has confidence that he can later exchange it for other goods.

If previously cryptocurrency was a local method of payment and used by a limited circle of people, now it is present on the Internet as an official means of currency circulation. There are cases when wages were issued with BTC tokens, and today they can be used to pay in restaurants, hotels, and shops in many countries around the world.

Cryptocurrencies occupy a strong place in circulation in Western countries, but they also gained popularity due to illegal activities in the space of the “deep” Internet, where it is used as the main unit of account.

There are many opportunities for speculative activity with the help of cryptocurrency, since its colossal distribution and naturally increasing rate makes it possible to determine the benefit from implementation after a specific period of time.

The modern financial system is considered inefficient and unfair, so Bitcoin implies an alternative to it. In fact, this is the ability to produce, use and store money on an equal basis with other participants in the common network. However, Bitcoin has experienced declines more than once in its history, but maintaining its rate is also carried out by the cost of electricity from mining installations, so in the near future it will be stable.