Bitcoin can be described as an unregulated digital medium of exchange which employs no legal tender status, controlled by the populace or users and it is aimed at disrupting the current modus operandi of fiat money and bringing down the monopoly that government has over money supply.
Bitcoin transactions are encrypted and stored on a distributed ledger made up of thousands of computer network nodes, the transactions are initiated by bitcoin users on a peer to peer bitcoin network.
Each bitcoin transaction uses cryptography to ensure privacy between transacting parties. The cryptographic encryption generates two mathematically related keys, the private key is kept by the initiator and used to transfer funds; the other is the public address or public key just like a bank account number used to receive funds.
For any currency to be used as money, it should serve as a medium of exchange, unit of account and store of value.
How to obtain Bitcoin:
• Through purchase on a bitcoin exchange in return for fiat money
• Through exchange for goods or services
• Mining of bitcoin (reward for solving bitcoin encryption algorithms)
ADVANTAGES OF BITCOIN:
• Less cost associated with the printing of security features, transport and storage of currency as in fiat currency.
• More reliable Medium of exchange: Individuals can transact business regardless of where they are located thus overcoming transaction costs and currency converting challenges
• Better unit of account and measure of worth: an efficient unit of account presupposes that a currency can provide a measure of relative worth. Just as the value of gold is derived from its rarity. The complex nature, mining difficulty, time consumption and finite of supply makes it rare (the protocol allows only 21 million coins to be mined).
• Better Store of value: The value of bitcoin is determined by the interaction of demand and supply known as market forces rather than policies or motives of central governments to inflate or deflate their currency or conflict.
DISADVANTAGES:
• Lack of regulation or oversight increases the risk inherent
• Few operational ecosystem of merchants and users for mass adoption
• 51% attack, theoretically harnessing more than 51% of computing power can give one access to control the blockchain.
• Miners provide the computing power necessary to maintain the blockchain ledger, without miners or the price of bitcoin falling below the cost of mining, miners will not be motivated to continue mining the block and the currency will be inoperable.
The 51% attack explained
The 51% attack undermines the immutability and consequently the trust in the bitcoin blockchain that uses the Proof of work algorithm. In a proof of work system, participants use computer hardware to complete a difficult algorithm, the SHA 256.
The miner who finds a solution to the algorithm first is the one that gets to decide which block to include next in the chain.
If a situation arises where a group of miners have control of more than 50 percent of the total hashing power in the network, then that group can outvote honest miners. Once the attacker has assembled sufficient hashing power, the miner will have to choose between using it to defraud people by stealing back his payments or using it to generate new coins according to Nakomoto.
Bitcoin transactions are encrypted and stored on a distributed ledger made up of thousands of computer network nodes, the transactions are initiated by bitcoin users on a peer to peer bitcoin network.
Each bitcoin transaction uses cryptography to ensure privacy between transacting parties. The cryptographic encryption generates two mathematically related keys, the private key is kept by the initiator and used to transfer funds; the other is the public address or public key just like a bank account number used to receive funds.
For any currency to be used as money, it should serve as a medium of exchange, unit of account and store of value.
How to obtain Bitcoin:
• Through purchase on a bitcoin exchange in return for fiat money
• Through exchange for goods or services
• Mining of bitcoin (reward for solving bitcoin encryption algorithms)
ADVANTAGES OF BITCOIN:
• Less cost associated with the printing of security features, transport and storage of currency as in fiat currency.
• More reliable Medium of exchange: Individuals can transact business regardless of where they are located thus overcoming transaction costs and currency converting challenges
• Better unit of account and measure of worth: an efficient unit of account presupposes that a currency can provide a measure of relative worth. Just as the value of gold is derived from its rarity. The complex nature, mining difficulty, time consumption and finite of supply makes it rare (the protocol allows only 21 million coins to be mined).
• Better Store of value: The value of bitcoin is determined by the interaction of demand and supply known as market forces rather than policies or motives of central governments to inflate or deflate their currency or conflict.
DISADVANTAGES:
• Lack of regulation or oversight increases the risk inherent
• Few operational ecosystem of merchants and users for mass adoption
• 51% attack, theoretically harnessing more than 51% of computing power can give one access to control the blockchain.
• Miners provide the computing power necessary to maintain the blockchain ledger, without miners or the price of bitcoin falling below the cost of mining, miners will not be motivated to continue mining the block and the currency will be inoperable.
The 51% attack explained
The 51% attack undermines the immutability and consequently the trust in the bitcoin blockchain that uses the Proof of work algorithm. In a proof of work system, participants use computer hardware to complete a difficult algorithm, the SHA 256.
The miner who finds a solution to the algorithm first is the one that gets to decide which block to include next in the chain.
If a situation arises where a group of miners have control of more than 50 percent of the total hashing power in the network, then that group can outvote honest miners. Once the attacker has assembled sufficient hashing power, the miner will have to choose between using it to defraud people by stealing back his payments or using it to generate new coins according to Nakomoto.
Page Links
- HomeBuyer's Guide to Understanding Mortgages and Rental Options in the US
- PWAs vs. Native Apps: Better Performance, Cost, and User Experience?
- The Future of Driving: Top Electric Vehicles to Watch now and Beyond
- Your Guide to Identity Theft: What You Need to Know to Stay Safe
- Deep Fakes: What They Are and Why They Matter
- Mastering Sales: Key Traits of Highly Successful Salesmen
- How to Write an Effective Business Plan: A Step-by-Step Guide
- Unveiled: Benefits of Neem No One Told You About
- 401(K) vs IRA: The Keys to Retirement Wealth
- Adopting Sustainability: A DIY Guide to Crafting Bio-Pesticides for Your Garden
- BRICS: Shaping the Future of Global Collaboration
- Ingenious Strategies to Skyrocket Your Website Traffic in 2024
- The Forex Battlefield: Tactical Tips to Shield Your Capital
- Cracking the Bid-Ask Spread Code: Journey into the Stock Market Price Dance
- Cracking the Green Vault: A Daring Dive into Carbon Credits
- Unraveling SEO Mystery in 2024 for bloggers
- Walking with Electric Vehicles (EVS)
- Benefits: Six sigma and learn in process improvement and profitability
- Do I need keto to lose weight?
- Build muscles with these 5 food
- Want to lose weight? 10 foods to stop eating
- 5 exercises that enhances your stamina instantly
- Bitcoin ETF: How does it work?
- ESG Rating: 12 Agencies that tell ESG Investors where to invest
- Achieving Sustainable ESG (Environmental, Social & Governance)
- The 9 Reasons: A business case for insurance
- CodeIgniter 4 | Choosing a faster PHP framework