Today, various money payment systems are available in the market, built on platforms such as smartphones, the Internet, and digital storage cards. Payment systems such as PayPal, Apple Pay, and Google Wallet have seen continuous growth.
Apart from payment systems that depend on fiat currency, the growing use of digital currency allows for faster and more flexible payment systems for buying and selling goods and services. One such digital currency is Bitcoin.
Bitcoin is one of the most well-known digital currencies today. Bitcoin uses the internet to process its transactions.
Bitcoin was invented in 2008 as mentioned in a paper titled “Bitcoin A Peer-to-Peer Electronic Cash System,” written by Satoshi Nakamoto. Nakamoto wanted to create a completely decentralized electronic cash system that does not rely on a central authority for currency issuance and validation of transactions.
The Bitcoin network started in 2009. According to CoinMarketCap, the total market value of all the bitcoins in the world was $160.4 billion as of March 4, 2020. The Bitfinex which is a cryptocurrency exchange owned and operated by iFinex Inc made the largest transaction of approximately $1.1 billion dollars BTC in cryptocurrency.
Bitcoins can be referred to as the Unit of currency, a new kind of money for the internet. It is fast, secure, and borderless. It stores and transmits value among users in the bitcoin network. Bitcoin users communicate with each other using the bitcoin protocol primarily over the Internet. The bitcoin protocol stack, available as open-source software, can be run on a wide range of computing devices, including laptops and smartphones, making the technology easily accessible.
Like fiat currencies, users can use bitcoins to buy and sell goods, send money to people or organizations. At specialized currency exchanges, Bitcoins can be purchased, sold, and exchanged for other currencies. Bitcoin is a virtual payment currency. Each User of a bitcoin owns a key that can be used for unlocking transactions in the bitcoin network and putting the control entirely in the hands of each user. Those keys are often stored in a digital wallet on each user’s computer or USB drive.
Bitcoins are created through a process called mining which involves competing to find solutions to mathematical problems while processing bitcoin transactions. The users in the bitcoin network operate as a miner and use their computer’s processing power to verify and record transactions.
Why is Bitcoin a successful distributed cryptocurrency?
1. Open-source software
Developers all around the globe verify the code and can make possible changes for adoption by the network.
2. Decentralized
Bitcoin uses peer-to-peer technology to operate with no intermediaries, central authority, or banks.
3. Global acceptance
The currency is widely accepted in many countries which allows users to do business globally.
4. Fast
The speed of transaction is faster with less time taken.
5. Automated
Bitcoin software is built upon algorithms for execution for payments and contracts.
6. Scalable
The system can be used by millions of users.
Features of Bitcoin
Network and digital currency
Bitcoin is a decentralized network and a digital currency that uses a peer-to-peer system to verify and process transactions. Instead of relying on trusted third parties, like banks, to process payments, the Bitcoin technology uses cryptographic proof in its computer software to process transactions and to verify the legitimacy of Bitcoins and spreads the processing work among the network.
With the creation of bitcoins, payments can be made over the Internet without the control and costs of a central authority for the first time. Prior to the invention, transactions carried out online always required a third party as a trusted intermediary to verify transactions.
The currency unit used in payments on the Bitcoin network is bitcoins denoted as BTC, not a fiat currency. Therefore, bitcoins in and of itself are also a digital currency, as it exists digitally or we can say virtually. The uppercase Bitcoin refers to the network and technology, while the lowercase bitcoin refers to units of the currency.
Decentralized control
Bitcoin uses cryptography, rather than trust in a central authority to manage its creation and transactions. The open-source nature of the Bitcoin software protocol allows developers to continue working on it.
The open-source nature of Bitcoin means that the source code is fully disclosed. This disclosure allows any software developer to examine the protocol and create their own versions of the software for testing or further development.
Benefits of using Bitcoin
Bitcoin technology has a certain number of benefits which are:
Payments freedom
Bitcoin has been created for quick transactions at a very low cost or no cost at all. Using Bitcoin Payments can be done with little or no fees. Bitcoin provides facilities to users with the option to include transaction fees for faster confirmations. It enables low transaction costs as there is no third-party involved. In addition to the lack of restrictions on transactions, users have full control of their bitcoins and the freedom to send and receive bitcoins anytime, anywhere, and to and from anyone.
Beneficial for merchants
Bitcoin unlike other electronic payment methods presents an alternative that is also widely accepted by businesses. Traditional credit card usage for processing of transactions is expensive for merchants, with customers often having to pay for a merchant account and various fees for transactions. These fees add up and increase the costs of accepting credit cards for payments.
Users of Bitcoin
The countries with the largest increase in the number of bitcoin users include India, Pakistan, Colombia, Canada, Greece, Romania, Argentina, Portugal, Indonesia, Ukraine, and Nigeria. The countries with the most female user growth include Greece and Romania.
According to Coinmarketcap, the continents where the use of cryptocurrency such as bitcoins has grown rapidly among the users are:
The Oceania continent has the highest number of bitcoin users, followed by Africa.
The continents with the most female user growth are:
According to the survey conducted by Statista, the use of cryptocurrency such as bitcoins, among the citizens of troubled countries who want to exploit the benefits of decentralized digital money is increasing globally as compared to the citizens of thriving nations.
According to the survey conducted by Statista, countries for example Turkey and Venezuela which have experienced high inflation in the last couple of years are adopting cryptocurrencies such as bitcoin cash. The depreciation of the national fiat currency, the lira, has resulted in cryptocurrencies steadily gaining popularity. Most Turkish people now own bitcoin.
Some countries have adopted, while others have banned cryptocurrencies such as bitcoins completely. Various countries including Bangladesh, Bolivia, Hungary, Kenya, Kyrgyzstan, Venezuela banned the use of bitcoin.
Summary
In this article, I gave a brief introduction to the history of Bitcoin. I have explained why Bitcoin is a successful distributed cryptocurrency. I have also mentioned the features as well as benefits of Bitcoin, and countries which have either accepted or banned the usage of Bitcoin.