We have covered a long way, right from the barter system to gold standard scheme to current bank transactions and now online exchanges. So, what is so great about cryptocurrencies like Bitcoin that we should shift into them? In present, we use fiat money, which has no intrinsic value. The only value it has because some central authority says so and we as a society accept that. But with cryptocurrencies no such central authority governs it, still, it is safe.
Most of you would have heard about the word BITCOIN. Now what is Bitcoin and where did it appear from? Bitcoin is not just a word; it is a digital currency. It assures you that you can exchange money just like an email or text message.
In late 2008, Satoshi Nakamoto, the unknown inventor of bitcoin, said he developed “A PEER-TO-PEER ELECTRONIC CASH SYSTEM”.
The unique feature of his invention was that he found a way to build a Decentralized Digital Cash System. Under this cryptocurrency, every peer or person carries the complete history of all transactions and thus of the balance of every account. To transfer money a wallet app is exercised, whatever amount you wish to transfer just type the name of the recipient. Of course Bitcoins will be transferred and later he can convert them into his currency.
Bitcoin introduces a platform on which you can run currency as an application on a network without any central points of control. A system completely decentralizes like the internet itself. It is not money for the internet but internet of money.
Bitcoin is the best kind of money better than any previous form of money. Bitcoin is the first kind of money which has benefits of both electronic and physical money. Just like electronic money, you can instantly transfer bitcoins from anywhere to everywhere in the world over the internet and you don’t need any third party gatekeeper for bitcoin. That’s because of the brilliant technology at the back end which means with Bitcoin even though its electronic or digital you have the right to spend without giving your data, without giving your privacy and without allowing anyone else to tell you whether that transaction can happen or not which means that even if though it could be economically unviable for banker to open branches in under privilege sections of the society. If a villager needs to open a bitcoin account which is a wallet all he needs is a smartphone and he can open a bitcoin account within seconds and then he has the power of an international credit card and oversees bank account and can pay anyone in the world with the palm of his hands. Bitcoin truly has the potential to check the fraud and bank the unbank, especially in developing countries.
Bitcoin is a global currency. Now Bitcoins back end technology is something similar to the internet which means no country or company or any organization owns it which means as a country, no country should have a problem with accepting Bitcoin as a form of currency or as a form of global currency or as a payment method because no country controls it. It also means since no one controls it, no one can shut it down just the way no one can shut down the internet, even if you can ban it you cannot shut it down which means bitcoin is robust and its truly global.
The currency is not completely anonymous, it exercises a distributed pubic universal database spread through a decentralized peer-to-peer network that makes use of digital signatures and is supported by a proof-of-work protocol to ensure security and legitimacy of funds in use.
Bitcoin makes use of keys or cryptographic information. It keeps track of addresses where the money is rather than of its users. Each address carries two keys: a public one and a private one. The public key is all about where bitcoin address is generated from, similar to an email address; anyone can look it up and send bitcoins to it. The private address, or private key, is similar to an email password; the owner can send bitcoins from it only if he carries one with him. Private key needs to be kept secret. In order to send bitcoins from an address, you prove to the network that you own the private key that corresponds to the address, without revealing the private key. This is done with a branch of mathematics known as public key cryptography.