Bitcoin for dummies – what it is in simple words

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Interest in cryptocurrencies in the modern world is growing exponentially, and it is difficult to find anyone who has not heard of bitcoin. However, not everyone fully understand the purpose and benefits of cryptopedia, as well as the prospects of digital money. In this article we are simple words, tell about what constitutes the leader of the cryptocurrency market, bitcoin, and how the mechanism of public key cryptosystems, and what are the forecasts for the further fate of the “digital gold”.

What bitcoin is. What’s the point?

Money is the equivalent of the cost of goods and services, as well as a medium of exchange and savings. Traditional currencies such as dollars, euros, rubles, and so forth, are called Fiat money issued by Central banks and States.

Usual electronic payment such as Yandexmoney, WebMoney, PayPal operate on Fiat money, as a matter of fact, an intermediary between banks and users.

Bitcoin is also a payment system, but it is for the calculations using their own currency.

In English the word bitcoin means “minimum coin”, the name is derived from the words “coin” (coin) and bit (unit of information).

The Bitcoin Price

Full information about the bitcoin exchange rate on this page

Bitcoin (exchange Ticker BTC) is the first cryptocurrency, the release of which is not controlled by any formal financial institution, it is not tied to GDP of any state. At the same time, bitcoin performs the functions of money can be used for the purchase/sale of goods and services, as a means of savings and exchange. This currency is traded on exchanges, where depending on demand, set its course in relation to traditional and other digital currencies.

The aim of the first developers of bitcoin was to obtain independence from the banking system and lower transaction fees. According to them, storing the money in the banks is associated with greater risk, namely that funds can be blocked, the Bank may refuse to execute a particular transaction, information about the account holders and the money can be stolen by hackers, Bank transfer fees and maintenance is too high.

The solution to these problems was proposed by developer (or by a group of enthusiasts, because personally no one saw him) named Satoshi Nakamoto.

Users were presented the special system was based on a highly advanced information system – the blockchain.

Bitcoin: the principle of operation of the network

The blockchain means the blockchain, that in this chain there are all transactions. To understand the principle of operation of this network will represent it in the form of a book. The components of the blockchain are pages, blocks, and records serve as transaction. Order in the blockchain is the book a new page is executed the processing of information about the old blocks. To remove any component of this system is not possible: the blockchain securely stores encrypted data on any changes in this transaction.

For the formation of new pages blockchain-books, i.e. the block that you are solving a math problem. People, using the computing equipment to cope with this task, receives a reward in bitcoins. The solution to these problems and provides system health and is called mining.

Features of the Bitcoin network

In what way were able to eliminate the problems associated with the high cost of translation, the lack of funds and anonymity of payments? The distinctive characteristics of the Bitcoin currency (relative to the traditional financial system) are:

Decentralization

Bitcoin is not controlled by any banking organization or a public entity, the system assumes the equality of all participants is one of the fundamental principles.

In contrast to traditional payment systems, there are no restrictions on the number of transactions and the amounts transferred.

Complete copies or parts of the blockchain system simultaneously stored on the computers of millions of users, so currently there are no mechanisms that would somehow affect the performance of the network. No one can “take cover” ongoing operations or cancel them. Theoretically this is possible, if one of the parties will achieve control over 51% of the computing capacity of the system, but in practice this is unlikely.

Anonymity

When transferring funds to another person does not provide for the disclosure of personal information, it is enough to know only the number bitcoin wallet.

All he can see to the system is the address or QR code. No names, surnames and other information about the senders and recipients. Such data protection is unthinkable with transfers using normal payment systems.
However, the number bitcoin wallet you can find out the number of stored coins and view transaction history. These data are freely available.

A high level of security

The hacking bitcoin wallet seems a daunting task. To identify the user includes a two-stage protection system and a unique access code.

All necessary information is posted in a separate file, accessed only by the owner. There’s also a downside – in case of loss of password or account number in the purse, to restore it will not work. Nowhere will come with the INN and the passport (unlike the banks).

Catch the coins when the transaction is also impossible: the system uses cryptographic algorithms to ensure reliable payments.

The irreversibility of transactions

Transactions in Bitcoin are non-refundable, the payment cannot be lock or retract (as, for example, what happens when you use Visa or MasterCard).

But this, in turn, implies a high level of trust between the sender and receiver of digital media.

The direct nature of the relationship

Bitcoins are sent between participants of the network for the system of “peer-to-peer” (P2P) means that the transaction only two actors – giving and receiving. The third party has no influence on the conduct of exchange.

The limitations of emissions

In order to prevent inflation of Bitcoin was envisaged the gradual limitation of the mass of the cryptocurrency. That is more than willing to use cryptocurrency, the more expensive it becomes because the user growth is happening faster than the release of new coins.

Emission “ceiling” of BTC is 21 million amount of cryptocoins, that is the number of Bitcoin is planned to produce up to 2140 year.

According to experts, currently lost about 23% of the secret keys. Due to the aforementioned characteristics of the system and can’t be recovered, the funds remain frozen in accounts for all that removes them from circulation and reduces the range of coins. Ultimately, it also increases the value of remaining bitcoins available.

The shortcomings and weaknesses

The popularity of bitcoin has attracted the system millions of new users, which increased the load on the network. It is projected that by the end of 2018, to maintain the operation of the system will require the same amount of electricity, how much per year is consumed throughout Argentina.

The increase in the number of transactions (every hour in a network committed about 10,000 operations) showed some problems in the system:

  • The average time of operation is 10 minutes. For comparison, the transaction Ethereum takes just 14 seconds.
  • The Commission paid by the user, though small, but because of the high value of bitcoin it can reach 10-30 dollars. What is noticeable when transferring small amounts.
  • The hype surrounding bitcoin has attracted the attention of fraudsters who use the inexperience of people and have access to their electronic wallets or introduce them astray with promises of quick money.
  • Furthermore, the lack of a stable exchange rate discourages investment and limits its use in trade relations. Buyers and sellers are afraid of losing profits, one of the possible drop, others because of the potential substantial growth.

Where you can pay with bitcoin

Capitalization of bitcoin in January of 2018, totaled 172,9 billion.

Despite these problems, the PTS remains the most popular cryptsetup, coins which are used for remittances, to pay for various goods and services, and are an asset for stock trading. With Bitcoin, for example, book a hotel room or book a plane ticket.

Readiness to accept bitcoin and other cryptocurrencies claim to large retail chains, online stores, dealers, real estate and cars. One of the latest news – Starbucks also wants to introduce cryptopedia. Bitcoin has already started to conquer near-earth space: it is used by the firm Virgin Galactic, working in space tours.

The first transaction involving cryptocurrencies occurred in mid-may 2010 on the BitcoinTalk forum. Someone under the name laszlo said that would be two pizzas for ten thousand bitcoins (when this number of coins was worth about $30). On the proposal responded to one of the users and the parties “shook hands”. So cryptomonad and received a “start in life”.

Where to get BTC

Become the owner of the most popular cryptocurrencies in the world you can use one of the following ways:

  • Exchangers and stock exchanges
  • Like any asset, bitcoins can be purchased for real (Fiat) money, using the services of specialized Internet sites. One of the most authoritative resources in terms of search and evaluation exchangers is www.bestchange.ru – this service monitors and ranking sites for users wanting to buy digital currency.

    You can also purchase bitcoins on the web, conducting cryptocurrency trading is a specialized exchange, where bought and sold digital coins of different networks. Solid players in this field recognized the following exchange:

    • Livecoin;
    • EXMO;
    • Poloniex;
    • CoinBase;
    • Bittrex.

    Remember that Bitcoins could be different on each of these resources.

  • Mining
  • Is the process of obtaining bitcoins as remuneration for maintenance of the blockchain. The miner uses the computing power of your hardware to close new units and earn an income. In the early days of kryptonite for its production had the strength of a simple computer.

    Now for the efficient of mining are increasingly being used the whole set of farms, which is a set of specialized devices, called colloquially “Astami”. This equipment is many and can function efficiently only under specific conditions (good cooling, powerful mains).

    Popular and alternative way to calculate and obtain Bitcoins is cloud mining. Its essence is as follows: the user leases the company has processing power that is configured for mining cryptocurrency and bring the investor a profit. When choosing a partner for cloud mining should be extremely careful: the network is full of fake services.

  • Earnings with cranes
  • For those who don’t want to bother with buying expensive equipment and to take risks on the stock exchange, there is another method of mining coins – services-taps. Here it is possible to earn digital currency for completing simple tasks – viewing ads or simple enter the “captcha”. This way the big money will not bring and suitable for beginners who do not want to delve into the technical aspects of mining cryptocurrency “big”.

    The States

    The leading world powers recognized the bitcoin new reality. The most important issue for financial regulators remains the anonymity of payments and the possibility of using bitcoin for criminal purposes: money laundering, tax evasion and funding banned organizations.

    In the United States, Japan and several European countries have developed and adopted legislation that reglamentary deals with digital coins. In Russia, there is public discussion of the draft law “On digital assets”, which regulates the activity of the cryptocurrency market.

    South Korea has gone through tough regulation, banks are prohibited from servicing transactions with the cryptocurrency, if the recipient and the sender of the funds does not pass verification in the banking system.

    Belarus has granted “most favored” startups related to cryptocurrency.

    The determining factor is the viability of bitcoin is the confidence of ordinary citizens willing to use it in everyday life.

    FAQ – frequently asked questions

    Who invented bitcoin

    The Creator of bitcoin is the programmer of Japan Satoshi Nakamoto. It is likely that this name hides a group of people. Doubt the fact that the system description is made in English and in Japanese there was no word.

    In 2010, Satoshi Nakamoto announced the termination of operation of the system, and the development of the concept continued without him

    How many years bitcoin

    First description of the system was published on 3 January 2009.

    Looks like bitcoin

    Bitcoins have no physical form. It is impossible to hold in your hands. In fact, bitcoin is a software code, a set of characters.

    How many satoshis in 1 bitcoin

    Satoshi – the minimum indivisible part of bitcoin, named after the alleged Creator.

    1 bitcoin is equal to 100 000 000 (one hundred million) satoshis.

    The official site of bitcoin

    https://bitcoin.org/ru official website of the system on which you can get acquainted with the technical details of the network.

    How many bitcoins are mined

    In mid-January of 2018 was produced 16.8 million coins, which amounts to 80% of the planned issue. This means that in the future generation of coins will slow down considerably.
    Interesting fact, if you start a startup, for confirmation of the transaction and creating a new block, the miner received 50 bitcoins, at the present time for “closing” the block system is generated only 12.5 bitcoins. After 2 years it will be halved to 6.75 bitcoins.

    Forecasts and prospects kryptonite Bitcoin

    Bitcoin enthusiasts initially believed his “freedom machine” that blows up in financial slavery and destroy the banks, crises and inflation.

    Experts and financial analysts disagree about the future of bitcoin.

    Some believe that this is another bubble that will burst and have invested in it investors will suffer losses. Others, conversely, believe that bitcoin has a bright future and he will become another means of payment and investment assets. The truth is somewhere in the middle.

    The emergence of new cryptocurrencies bitcoin thronging position, against which he appears slow and expensive. Developers to solve the problem of accelerating the completion of transactions within the network, to prevent possible illegal actions and increase system reliability.

    In any case, at the moment, bitcoin continues to be an attractive target for investment as a potential currency of the future.

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