Bitcoin, Cryptocurrency, and Public Chains - Steemit Crypto Academy Season 4 - Homework Post for Task 5
(2) What Is Bitcoin and what was the Aim Behind Bitcoin Invention? Is Cryptocurrency Good For A Business To accept As Payment? Why?
What is Bitcoin?
Bitcoin is a digital or virtual currency that is used on the internet through mobile devices and computers. Bitcoin is the first-ever currency in the world of cryptocurrency. It is the first-ever digital currency to ever exist. It was invented by a person or a group of persons known as Satoshi Nakamoto on the 3rd of January 2009. The identity of the person or people bearing the name Satoshi Nakamoto remains at large.
Bitcoin is called a cryptocurrency because they are generated through a process known as Mining. This process involves miners generating a block (which is used to store data) in Bitcoin's blockchain and getting rewarded in Bitcoins (BTC). Because these blocks are confirmed by the validators on the Bitcoin's blockchain and thus given a hash, the Bitcoins are secured through a cryptographic hash.
As Bitcoin is a digital currency, it cannot be held by a user physically, it is only stored on the wallets of those who own Bitcoins. Bitcoins are Decentralized in nature, therefore they are not issued or backed by most governments as a legal tender in their respective countries. Even though Bitcoins are not legal tender in most countries, Bitcoin is the most popular cryptocurrency. Its invention sparked the rise of other cryptocurrencies. Collectively, these other cryptocurrencies are known as Altcoins.
The creation, transaction, and processing of Bitcoins (BTC) is done on Bitcoin's blockchain network. The Bitcoin blockchain network consists of a collection of computers called Nodes or Miners that all come together to run Bitcoin's code to process and verify transactions that took place on the network. Every transaction that has been verified is then stored as data in a block and chained together with other blocks on the network, starting with the initial or genesis block.
The Bitcoin blockchain network provides a safe, secure, and transparent means by which Bitcoins are stored. This is so because all the nodes on the blockchain network have the same list of blocks and data in them, and when new blocks are being filled with new data, everyone on the network can easily see it. This makes it so that no one can cheat the system.
For the system to be cheated or hacked on, 51% of the network of computers have to be infiltrated to enable the hacker to get the majority of votes. As of September 2021, Bitcoin's blockchain network has up to 11,300 nodes working to make the blockchain network functional. And if a hacker was to successfully hack the blockchain network, then the nodes on the blockchain would then perform a Forkto a new blockchain, thus making the efforts of the hacker to be wasted.
Users in possession of Bitcoins (BTC) can access and initiate a transaction with their Bitcoins (BTC) using their Private & Public Keys. A private key is like an ATM pin or a user's signature on a bank check, which is used to authorize a transaction. This key should be kept secretly and safely. It is suggested that it should be stored on a cloud service, like Goggle Cloud. The public key is an address, like a bank account number, but usually, a wallet where other users can send Bitcoin and can be accessible to anyone. Both keys are created through a long string of numbers and letters that a linked through a mathematical encryption algorithm.
The image above is a representation of Bitcoin's performance in the market. Since its inception, Bitcoin has remained the most popular cryptocurrency in the market. Currently, it is Ranked No.1 and has a Price of $47,826.61. It has a Market Cap of $900,783636,076, a Fully Diluted Market Cap of $1,004,358,754,366, a 24 Hour Trading Volume of $27,525,079,037, a Circulating Supply of 18,834,362.00 BTC, a Maximum Supply of 21,000,000, and a Total Supply of 18,834,362. Its market symbol is BTC.
There are many reasons why Bitcoin is very valuable, but the most common ones are the scarcity of Bitcoins concerning other cryptocurrencies, its demand in the market, and its marginal cost of production.
Aim Behind Bitcoin's Invention
In 2008, during the time of the global financial meltdown, Satoshi Nakamoto was in the works try to create a digital payment system that would be independent of third parties such as government entities and financial institutions. He was in the process of building an electronic payment system that will be purely decentralized, meaning that transaction processes would be independent of a central authority.
In 2009 when Bitcoin was first introduced, at first most people did not understand this coin and its mechanism technology which is blockchain. Later on, it gained a lot of popularity even up till today it is very popular as Bitcoin is ranked number 1 in the cryptocurrency world and market. After the introduction of Bitcoin to the world, a lot of other cryptocurrencies came up, some failed and some succeeded.
Bitcoin aims to provide a mechanism where people can send money over the internet. It was created to provide an alternative payment system that would operate independently from central control, however, it can be used like fiat currencies.
It was created to make transactions between two people very easy and fast. That is why its network is decentralized in nature and is based on a peer-to-peer framework. This means that a person in one location can send funds to another person in another location and that person would receive the funds faster. As a result of this, the fees incurred for a transaction are significantly lower than the fees charged by banks.
Also due to its decentralized nature, owners of Bitcoins have 100% control over them.
Is Cryptocurrency Good For A Business To accept As Payment? Why?
Yes! Cryptocurrency is very good for a business to accept as payment. There are reasons why they are good to be accepted by a business as a means of payment. However, accepting cryptocurrency as a means of payment have its pros and cons depending on the approach used. It is good for businesses that want to accept cryptocurrency as payments to have a clear understanding of why they made the decision.
Here are some of the reasons why it is good for cryptocurrency to be accepted as payments by businesses:
Normally, cryptocurrencies are good to be used as payments for businesses because they offer lower fees when compared with traditional payment networks.
The payment transactions done with cryptocurrency are peer-to-peer, that is, no third parties are involved. This means that businesses are likely to receive their payments directly and on time.
Because transactions involving cryptocurrencies are processed on a blockchain, and the blockchain is decentralized in nature, this means that the transactions are secure and are transparent. Both the business and the customer can see the transaction going on in real-time.
Using cryptocurrency enables companies to have access to new demographic groups. A recent study showed that close to 40% of customers that make payments with cryptocurrency are new customers, in addition, the amounts paid are twice as much as those who pay with a credit card.
Accepting cryptocurrency allows businesses to gain access to new capital and liquidity pools from normal investment vehicles that have been tokenized.
Use of cryptocurrency gives way to certain options that are not available when dealing with fiat currency. For instance, cryptocurrency can allow businesses to do revenue sharing in real-time and accurately.
Cryptocurrency allows businesses to have an effective balancing asset to cash because over time cash can depreciate due to inflation. Cryptocurrency is an asset that attracts investors thereby making them an investable asset, and the performance of some of them has been exceptional. However, there are risks with cryptocurrency which is associated with volatility, so using them should be critically considered.
Conclusion
Bitcoin is a payment system that runs on the Bitcoin blockchain network. It was developed to help facilitate payments among users in a peer-to-peer manner. Because it runs on a blockchain, transactions involving Bitcoins are secure, transparent, and fast. Bitcoin has a cryptocurrency called bitcoins (BTC). It is the native coin of the Bitcoin blockchain and it is given to miners as rewards for engaging in mining activities on the Bitcoin blockchain. It is the first-ever cryptocurrency to ever exist.
The purpose of Bitcoin is to make payments to take place directly between two people. This means that third parties are not involved during the transactions that take place between two people. It was also created to give users in possession of Bitcoins full autonomy over their funds.
Finally, cryptocurrencies are very good to be accepted as payment by businesses solely because of their peer-to-peer approach as third parties are eliminated from the transaction process. It also provides a transparent way by which the transactions that are done can be seen in real-time. Also due to the nature by which transactions are stored, it makes cryptocurrency to be a safe and secure option.