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Bitcoin Eliminating Central Banks

By Andrea Castillo (Threats Analyst) Bitcoin, a decentralized peer-to-peer digital currency that allows for online payments to be sent directly from one party to another without going through a financial institution is becoming increasingly popular. Bitcoin has already established itself as viable money because of the low or nonexistent transaction fees involved with exchanging Bitcoin and national currencies. You can visit our official site for further information. 

Bitcoin’s main appeal comes from its decentralization; unlike typical currencies, Bitcoin is not managed by any central authority, rendering it immune to government interference or manipulation. Despite its growing legitimacy in terms of being an effective medium of exchange, Bitcoin remains very much dependent on governments’ policies towards fiat currencies. If governments choose to restrict or ban Bitcoin exchanges between their national currency and Bitcoin, Bitcoin will likely suffer tremendously.

Bitcoin -Open-Source Software       

Bitcoin is open-source software that was first released in January of 2009 by Satoshi Nakamoto. Bitcoin uses peer-to-peer transactions between users without going through any intermediary financial institutions. Bitcoin works by allowing the participants of the network to transfer ownership of certain Bitcoins amongst themselves by digitally signing a hash of the previous transaction and their public key (a string of numbers) and adding it to the end of the coin. 

This creates an ever-growing chain of ownership, or ‘blockchain,’ for each Bitcoin that ensures that each subsequent owner has full claim over it; this prevents double-spending (using Bitcoins purchased on different occasions for separate transactions). The process also allows users on the network to verify Bitcoin balances and enforce Bitcoin rules such as the number of coins that can be created. 

Bitcoin’s internal economy is self-regulating, meaning that it requires no outside entities or authorities to manage its day-to-day functions. Bitcoin prevents double-spending by basing all Bitcoin transactions around blocks; these blocks are packages of data that contain Bitcoin transactions and form the blockchain, which is a public ledger of all Bitcoin transactions. Each block contains a cryptographic hash (a unique string of numbers) based on the preceding block; each successive block builds upon its predecessor until a fixed number (21 million) has been reached.

Bitcoin -Viable Money       

Bitcoin has already established itself as viable money because it provides low transaction costs and eliminates credit risk between two parties engaged in an exchange. Bitcoin also eliminates the necessity for merchants to purchase expensive and specialized credit card machines, which can charge up to 3% of the transaction value as a fee. Bitcoin is free from government manipulation or interference because its underlying infrastructure is decentralized across hundreds of thousands of computers worldwide. This means that Bitcoin transactions are fast and irreversible; once a Bitcoin has been transferred, no one can take it back unless the recipient consents.

Governments have taken different approaches towards Bitcoin depending on their goals surrounding Bitcoin’s proliferation and design. China enacted a complete ban on Bitcoin exchanges in September 2017, whereas Japan recognized Bitcoin as a legal payment method two months earlier in July 2017. The United States only recently began enforcing regulations around Bitcoin exchanges by requiring them to register with the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). 

Bitcoin is only just becoming recognized as viable money by governments that are starting to think about how Bitcoin can replace certain transactions currently in the government’s control, such as tax collection. These developments highlight Bitcoin’s transitional phase between being a commodity and becoming a legitimate medium of exchange. 

The main drawback to Bitcoin so far is its lack of liquidity compared with other currencies; Bitcoin exchanges face problems when attempting to match buyers and sellers because Bitcoin lacks depth in the market. As Bitcoin becomes more legitimate, these liquidity issues will likely be resolved, especially if large-scale investors move into the market.

Benefits of Bitcoin       

The main benefits for consumers using Bitcoin include low or nonexistent fees and protection against identity theft. Bitcoin has no processing fees because Bitcoin miners are financially incentivized to verify Bitcoin transactions through the Bitcoin system. Bitcoin addresses are protected against identity theft because Bitcoin users maintain control of their Bitcoin through private keys, which are long strings of numbers and letters linked mathematically to Bitcoins that are stored in Bitcoin wallets. 

Bitcoin wallets have different levels of security depending upon how they are accessed. Those stored on websites or exchanges are vulnerable to hacking whereas offline storage is not. Bitcoin Mining is a peer-to-peer computer process used to secure and verify Bitcoin transactions—payments from one user to another on a decentralized network.