To eradicate the confusion surrounding Bitcoin (BTC), let us separate it into two sections. On one side, we have bitcoin-the-token- a snippet code which symbolizes ownership of a virtual idea. On the other side, we have bitcoin-the-protocol, a distributed ledger system which keeps a network of balances of the bitcoin token. Both components are labeled as “bitcoin.”
The system support transactions without regulation from a central power, like banks. It is developed and kept virtually. Unlike traditional currencies like dollars, BTCs are not printed, they are created by computers using a software.
BTC was the first illustration of what is currently known as cryptocurrencies- an evolving asset class which has some common features with traditional currencies.
Who Invented BTC?
Satoshi Nakamoto, a pseudonymous software engineer, suggested BTC in 2008 as a digital payment method based on cryptocurrency/mathematical proof. Satoshi’s main concept was to create a method of currency exchange, sovereign of any central regulation, which could be transferred electronically in a secure, provable and immutable manner.
How BTC Differs from Traditional Currencies
BTC can be applied in carrying out business electronically, after the buyer and the seller of a good or service have come into agreement. It acts as conventional dollars or euros that are also transacted virtually. However, BTC is distinct from traditional currencies in several ways:
- Decentralization
This means that BTC has no central authority, it is regulated by a series of volunteer codes, and operated by an open network of connected machines globally.
- Limited Supply
Traditional currencies enjoy unlimited supply- financial institutions can supply as much as they desire and can even alter a currency’s price relative to others. Unlike these fiat currencies, the BTC supply is tightly structured by the basic algorithm. A certain amount of BTC trickle out each hour and the trend persist till a peak of twenty-one million is attained.
- Pseudonymity
While sources of fiat digital transactions are normally made known, BTC investors and traders operate in semi-anonymity. Due to lack of a central authority, traders are not subjected to identify themselves while transacting.
- Immutability
Unlike traditional electronic payments, BTC payments are not reversible since there is no central regulator to order payment reversals.
- Divisibility
The least unit of BTC is known as Satoshi that is worth 100 millionth of a BTC (0.00000001). this can possibly facilitate microtransactions, which fiat currencies cannot.
