Steemit Crypto Academy| Homework For Task 5 by @bibsonhabib
My regards to professor @stream4u for this educative assignment. Let’s get started!
QUESTION 2: WHAT IS BITCOIN AND WHAT WAS THE AIM BEHIND BITCOIN INVENTION? IS CRYPTOCURRENCY GOOD FOR A BUSINESS TO ACEEPT AS PAYMENT? WHY?
WHAT IS BITCOIN ?
Launched on 3rd January, 2009 by a anonymous person or group of people named Satoshi Nakamoto, Bitcoin is a decentralized digital currency, also known as cryptocurrency which are used for the payment of goods and services.
A cryptocurrency is a virtual currency that has no physical values or denomination. That is it has no physical notes like a $1 or £1 banknote which the centralized financial institutions hand to its users to pay for goods and services.
Bitcoin was launched with the sole aim of replacing the local financial institution’s paper money for the payment of goods and services. Satoshi saw the local finance system to be unreliable as they were always in constant problems.
One of these such problems led to Bitcoin’s launch on January,2009. This can be seen on a newspaper headline dated in 3rd January,2009 which read “Chancellor on the brink of second bailout for banks”.
Seeing that people were now beginning to loose trust in these institutions due to their constant problems, launching an alternative method of payment other than what these financial institutions provided will see a mass acceptance since banks were at a peak of a financial problem.
Satoshi took advantage of this opportunity to launch and mine the first blocks of the bitcoin blockchain. This mining activity came with a block reward of 50 BTC.
The maximum supply of bitcoin is 21 million. This means that there would only ever be 21 million bitcoins. Hence when this number is reached, no new bitcoins can be mined again.
Mining is one of the process users on the blockchain earn BTC. This involves the used of sophisticated computers to solve complex algorithms on the blockchain. When a miner successfully solves this complex mathematical equations, he is given a block reward.
To delay the the supply of bitcoin to reach the maximum supply of 21 million faster, bitcoin goes through a process called Halving which is the division of the block reward earned by miners into 2, thereby reducing the supply of new bitcoins into the market, prolonging the depletion of the remaining supply.
For example,the current circulating supply of BTC is 18.842 million BTC, hence a remaining supply of 2.158 million BTC, halving the block rewards would delay the time the remaining 2.158 million BTC supply to be exhausted.
Since it’s inception, bitcoin has gone through 3 halvings. Halving occurs when every 210,000 blocks are mined. The first occurred in 2012 with a block reward of 25 BTC, the next in 2017 with a block reward of 12.5 BTC and the current in 2020 with a block reward of 6.25 BTC.
Currently, the current price of 1 BTC on coinmarketcap is $56,908.34, with a market cap of $1.072 trillion and a market dominance of $46.65%.
SOME ADVANTAGES OF BITCOIN
Decentralized
On the bitcoin blockchain there is no central regulatory body, hence users have full control over their assets and are solely responsible for whatever happens to their funds. Users can therefore trade at anything without any restrictions.
Secure
Bitcoin is highly secured due to its blockchain technology. Bitcoin transactions make use of hash technology which makes it difficult for hackers to decode transactions information in order to steal funds. The content of the hash can only be decoded by the sender and recipient.
Low carry or transaction fees
Bitcoin charged very low amount as network carry or transactions fees. This is due to its ability to eliminate intermediaries who would have charged commissions on these transactions.
AIM BEHIND THE INVENTION OF BITCOIN
The main aim of bitcoin before it was launched by the anonymous satoshi nakamoto in 2009 was to be used as;
Payment Method
Satoshi’s main aim for Bitcoin’s launch was to provide a fast, cashless and alternative payment method for goods and services.
Satoshi sought to eliminate the use of cash as a method of payment since he saw it to be outmoded. He saw digital currencies as a means of exchange for the future.
Eliminate middle men or intermediaries in transactions
Satoshi saw intermediaries such as middle men and banks to be corrupt and unreliable when it come to handling transactions. There were always delays in processing and confirming transactions which made funds transfer and trading very stressful.
To satoshi, eliminating this intermediaries and bringing the two parties into direct contact would speed up transactions and also make them easier to process.
Eliminating huge transaction fees
Also satoshi sought to eliminate the huge transaction or carry fees charged by the local institutions in order to process a transactio.
The reason for this high fees was because an intermediary was processing the transaction, hence this fees were their commissions.
Eliminating these intermediaries would these intermediaries would therefore result in little or no charges on a transaction.
Finally satoshi sought to build a digital financial institution free from any form of regulation or governance by a central body or authority called a blockchain.
This blockchain would make its users have direct access to their funds and can perform a transaction anytime they will. This platform would not require users personal information, providing anonymity for its users . Hence users would be secured on this platform.
IS CRYPTOCURRENCY GOOD FOR BUSINESS TO ACCEPT AS PAYMENT?
Yes I am in support bitcoin can be used as a means of payment considering the following factors
Faster mode of payment or processing transactions
Payments involving Bitcoin are processed very fast since they do not involve third-parties. Unlike the local financial sector; precisely banks where transactions have to pass through the bank’s set up systems before they reach the recipient
Transactions take a matter of seconds to complete on the blockchain
Low carry or transaction fees
Fees charged on Bitcoin transactions are very low compared to other payment methods. A $100 transaction of bitcoin can charge as low as $0.2, same transaction on a centralized exchange can attract a charge of 5 to 10% of the original amount. Hence bitcoin is a cheaper mode of payment.
Secure
Bitcoin transactions are secured by blockchain technology with makes it difficult for hackers or fraudsters to rep in and steal funds. Transactions are secured with transactions hashes, hence only the sender and recipient can decipher the hash. This makes payments highly secured on the blockchain.
Safe
Bitcoin payments are irreversible hence is a safe mode of payment. Taking the banking sector for example, a buyer may request for a cash back after the has finished transacting business with a seller and the sold goods have been already sent to the buyer.
This robs the seller off his money and profit. Hence duping is very rampant in the local financial industry. The irreversible nature of a bitcoin transaction cancels out this phenomenon.
Anonymous
Parties involved in Bitcoin transactions are anonymous in identity. The sender and receiver do not know each other physically. This protects both parties from unknown attacks like robbery in reality, should they be known in reality.
Conclusion
In conclusion, bitcoin has been helpful since it’s creation as it has paved way for the creation of other cryptocurrencies like ethereum and dogecoin.
All these cryptocurrencies have led to the creation of a cryptocurrency market where traders can trade cryptocurrencies in order to make profits, thereby creating jobs for people.
This has been a very educative lecture, much thanks to professor @stream4u.
My warm regards to all the professors and members of this wonderful community.
Thank you for your time.
