What is Bitcoin?
Bitcoin is a worldwide payment system and a first decentralized virtual currency, which offers quick, cheap, and highly private payments for everyone. Bitcoin was developed and launched as an open-source protocol based on a whitepaper written by Satoshi Nakamoto. Since its release, bitcoin became the best-known, established and leading cryptocurrency in the industry that inspired the creation of other digital currencies – altcoins.
As Bitcoin is separated into two components, it might cause a confusion.
- Bitcoin – with a capital letter is a decentralized P2P network which helps to facilitate transactions between people without a middleman. The Bitcoin protocol is openly published and developers can review the code as well as easily adapt an open source software and modify it to their own needs.
- bitcoin – with a lowercase ‘b’ is the coin which exists on the Bitcoin network; it can be perceived as a currency for the internet, in the same way dollar or euro are currencies for the United States and Europe. Bitcoin-the-coin is the first cryptocurrency, also known as virtual or digital currency, to ever exist, and BTC is an abbreviation of it.
In 2009, Bitcoin was developed and launched as an open-source protocol based on a whitepaper written by Satoshi Nakamoto, who described the bitcoin as a digital currency backed up by the idea of an electronic payment system that should be secure, verifiable and independent of any central authority.
Since the Bitcoin release, it has experienced highs and lows, however, it stayed as the preeminent cryptocurrency in the world. In 2013, SpectroCoin realized the potential of Bitcoin and in order to avail it, created an all-in-one solution - a financial platform.
Is bitcoin different from traditional currencies?
Fiat currencies are a physical medium of exchange with unlimited supply that is issued and controlled by a government, bitcoin, on the other hand, has a set maximum supply of 21M coins and is not controlled by any government or entity. Both crypto and fiat currencies coexist alongside each other and have their advantages and disadvantages. Bitcoin has some resemblances to fiat money: value changes according to market variables, as a virtual currency is used to buy things or pay for services, load cards and people already use it in their daily lives as any other fiat currency, but this is where similarities end.
How does Bitcoin work?
A shared public ledger - the “blockchain”, was created to power Bitcoin and till now is commonly associated with cryptocurrencies. Information on the blockchain is recorded and instantly visible to everyone, and it also contains every transaction ever processed since the beginning of the Bitcoin network, allowing to verify its validity. Digital signatures corresponding to the sending addresses protect the authenticity of each transaction, which allows users to have full control over sending BTC from their own Bitcoin addresses. All transactions have to be confirmed by the network through a process called mining.
What determines the bitcoin price and value?
Supply and demand
There are several factors that can affect the bitcoin value and price volatility. The Bitcoin market is one of the few perfect market examples, where price is determined by supply and demand of bitcoins. If the demand for bitcoins increases at a faster rate than the supply increases, it drives up the price. Keeping in mind that there are only 21 million bitcoins in total that can be mined and new bitcoins are created at a decreasing rate, the demand follows the level of inflation to keep the price stable.
Bitcoin is a decentralized currency and there is no market intervention to impact the bitcoin value, however, while bitcoin has a constant supply and its demand is increasing, the value will grow. In other words, its value comes directly from people willing to accept bitcoin as a payment currency.
Availability on currency exchanges and trading platforms
It is worth to mention that bitcoin availability on currency exchanges and trading platforms that are becoming more popular among investors and traders can have huge impact on determining its value. Investors are building their wealth by long term holds and reinvestments of the growth into more cryptocurrencies and traders uses every possibility to cash out as soon as currency outperforms initial purchase price.
Cryptocurrency exchanges and trading platforms draw attention and motivate more participants to join the market, creating a network effect. While setting the rules of how and which cryptocurrencies can be added, exchange platforms make available ones more popular. It is very common that when altcoins get listed on bigger exchanges, the volume and the wider accessibility increase the price too.
Presence of competitors
Cryptocurrency itself is not regulated by a central authority, so bitcoin or any other altcoins rely upon developers and miners. This means that the community can be divided over how to solve any troubles regarding slow transaction speed, scalability etc. This is one of the reasons why “forks" happen, resulting in new cryptocurrencies like bitcoin cash or bitcoin gold. Often “forks" are associated with cryptocurrency price changes because it can cause exchange platforms, business, and users to switch to the other coin type. In one way or another all altcoins and forks derived from Bitcoin's source code, which makes bitcoin a fundamental cryptocurrency that stands out in the crypto market and puts other cryptos into comparison with it. However, it has its rivals that investors can choose from.
It is difficult to understand how the competition might affect pricing, but the presence of competitors can influence it.
Why do people trust bitcoin?
Bitcoin can be a superior payment method for the digital age: bitcoin transactions are practically free, which makes them a much cheaper alternative when compared to debit or credit cards; bitcoins are accepted globally, which makes them the perfect platform for remittances and international transactions; and payments are nearly instant, so the receiver does not have to wait for a settlement etc.
Bitcoin is more secure than most existing financial services because the technology behind Bitcoin can be trusted as long as users are willing to learn how it works, including network protocols, cryptography, IT security and payment systems. However, there are two key technological risks associated with the use of virtual currencies:
- Security risk, because virtual money is equivalent to cash in digital form. Security issues are related to the way people and services are handling and storing their bitcoins, rather than the Bitcoin protocol itself. The vulnerabilities of the wallets, exchanges that have loopholes can cause security breaches or be affected by cyber-attacks.
For instance, in order to secure its assets, 99% of SpectroCoin’s digital currency is stored in protected offline storage. Also, SpectroCoin strongly encourages all customers to take preventive measures and change account passwords frequently, backup their data. Users are advised to check their accounts for suspicious activity, always be cautious and avoid clicking on links or downloading attachments from suspicious emails.
- Stability risk, because the uptime of the payment system has to be up nearly 100% all the time. Bitcoin transactions require the availability of internet in order to operate. Even though the receiver does not need an active internet connection to eventually receive bitcoins, it is a must if they wish their wallet to reflect the funds that they’ve received.
The biggest trust issue with digital currencies is speculations and the price volatility because owners of the currencies are not guaranteed when the price will fluctuate and if it will bring profit or loss. After learning why the prices can change and as long as users invest responsibly in the crypto market, it is easier to understand the reasons behind growing trust in cryptocurrency: bitcoin payments can be audited, the ability to choose fees, greater security and control, transparency, a reduced level of risk for merchants by anyone including industry professionals, students, and researchers.
Is bitcoin anonymous?
Even though Bitcoin addresses are not tied to the identity of users on a protocol level and nobody needs to submit any personal information during transactions, achieving the complete anonymity is very difficult. Bitcoin is pseudonymous because every transaction is recorded in a public blockchain, which only contains the public key and the amount of assets transferred, however it is still linked with an electronic address. As soon as any personal details are linked to a Bitcoin address, the purchase history is also revealed to your wallet provider.
While techniques are still improving in order to conceal an individual’s identity and activity, SpectroCoin reminds that it is very important to adopt good practices in order to protect your personal privacy.
Legal status and regulation
As cryptocurrency is decentralized and has no central authority attached to any government, this peer-to-peer payment system tempts representatives from law enforcement and financial agencies. The legality of digital currency is a very common question among many countries that are trying to determine how to treat crypto. The fact that bitcoin is pseudonymous, allows governments to accuse it of being a tool for criminal activities. However, the situation is changing rapidly and many countries are announcing new laws on bitcoin and cryptocurrency in general. Some are welcoming, others are cautious and discreet. For example, while The European Union (EU) still hasn’t issued any official decision on regulation, in Japan bitcoin is recognized as a legal means of payment.
Bitcoin’s reputation and the world’s trust in it will grow as long as services will improve customer protection. SpectroCoin follows all applicable laws. As a result, it takes a proactive approach to ensure legal compliance - implements EU and international standard AML, also all funds are processed through regulated EU financial institutions.
Where to buy bitcoins?
As the cryptocurrency market is expanding and gaining more trust, new places to buy bitcoin create bigger competition between cryptocurrency exchanges. It is no surprise that an overwhelming number of exchanges makes it hard to narrow down the best options. SpectroCoin provides different payment methods to help you to manage bitcoins, including bank transfers and various e-wallets. SpectroCoin Pro allows you to buy or sell bitcoin safely and within seconds, so you can receive your assets immediately.
SpectroCoin is rapidly gaining trust - more than 1,000,000 clients are already using the cryptocurrency exchange, blockchain wallet to store bitcoins, and payment processing services for merchants. Investors benefit from a diverse range of services and due to the increasing demand, SpectroCoin is expanding its services to support other virtual currencies.
Are there other cryptocurrencies?
Bitcoin is the first cryptocurrency and since its release became the best-known, established and leading crypto in the industry. Bitcoin inspired other digital currencies, which presented themselves as modified and improved versions of it, called altcoins. There are hundreds of altcoins and they alter from each other. Some have a different economic model, employ different proof of work mining algorithms, offer less or more privacy when compared to Bitcoin, etc.
A few altcoins have gained popularity among investors. For this reason, additional Ethereum, NEM, Dash, Litecoin, Ripple, Stellar, and Banker wallets were added to SpectroCoin platform. We also offer a great variety of stablecoins, including Tether, TrueUSD, USD Coin, and Paxos Standard.
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