What is Bitcoin?

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Quick Answer

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 confusion.

  • Bitcoin – with a capital letter is a decentralized P2P network that helps to facilitate transactions between people without an intermediary. The Bitcoin protocol is openly published, and developers can review the code and easily adapt an open-source software and modify it to their own needs.
  • bitcoin – with a lowercase ‘b’ is the coin that 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 bitcoin as a digital currency backed 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 has stayed the preeminent cryptocurrency in the world. In 2013, SpectroCoin realized the potential of Bitcoin and created an all-in-one solution - a financial platform.

Is bitcoin different from traditional currencies?

Fiat currencies are a physical medium of exchange with an unlimited supply that is issued and controlled by a government. On the other hand, Bitcoin 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, the 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. It also contains every transaction ever processed since the Bitcoin network's beginning, verifying its validity. Digital signatures corresponding to the sending addresses protect each transaction's authenticity, allowing 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

    Several factors can affect the bitcoin value and price volatility. The Bitcoin market is one of the few perfect examples where the supply and demand of bitcoins determine the price. If the demand for bitcoins increases faster than the supply, 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 mentioning that bitcoin's availability on currency exchanges and trading platforms that are becoming more popular among investors and traders can significantly impact determining its value. Investors build their wealth by long-term holds and reinvesting the growth into more cryptocurrencies. Traders use every possibility to cash out as soon as currency outperforms the 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 common that when altcoins get listed on bigger exchanges, the volume and the wider accessibility increase the price too.

  • Presence of competitors

    A central authority does not regulate cryptocurrency, so bitcoin or 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 they can cause exchange platforms, businesses, and users to switch to the other coin types. In one way or another, all altcoins and forks are 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.

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 how people and services handle and store their bitcoins rather than the Bitcoin protocol itself. The vulnerabilities of the wallets and exchanges that have loopholes can cause security breaches or be affected by cyber-attacks.

For instance, 99% of SpectroCoin’s digital currency is stored in protected offline storage. Also, SpectroCoin strongly encourages all customers to take preventive measures, change account passwords frequently, and 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 100% of the time. Bitcoin transactions require the availability of the internet to operate. Even though the receiver does not need an active internet connection to receive bitcoins, it is a must if they wish their wallet to reflect the funds they’ve received.

The biggest trust issue with digital currencies is speculations and 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 after users start investing responsibly in the crypto market, it is easier to understand the reasons behind the 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 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.

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. 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 expands and gains 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 more smallish 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 the SpectroCoin platform. We also offer a great variety of stablecoins, including Tether, TrueUSD, USD Coin, and Pax Dollar.

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