Blockchain, the technolog of Bitcoin is the hottest buzzword in technology at present. Checking the blockchain landscape, there is a project or startup for each and every use case from health data to banana tracking. Blockchain is the solution to every ills.
Blockchain is the technology behind bitcoin. A tamper-proof, distributed database that could be leveraged in a lot of other apps. Also, it’s common to hear that like MySpace or AOL, Bitcoin could be overtaken by competitors who leverage the technology better, fast. But, the blockchain technology is very new and inherently different compared to all analogies aimed in simplifying it or the crypto network fall apart in their usefulness quickly.
The uniqueness of blockchain makes it exceptionally hard to understand. By extension, it’s exceptionally tempting and easy to development upon it a panacea for each problem without a clear idea of how it would help.
WHAT BITCOIN IS ALL ABOUT
Bitcoin and the dollar value of bitcoin is not a fraud, not is it a golden nugget. People continue having strong views and positions on what it is and debate on its legitimacy, potential and relevance. The discussions are meaningful and leave a lot of more thoughts to ponder. However, those are opinions, and although useful, facts are important and critical to know. Knowing facts would contribute to meaningful discussions and questions.
BITCOINS FACTS TO KNOW
The bitcoin market is growing. Nevertheless, many people are still not aware of what the technology is all about and its potential. The following facts could help provide a better understanding and perspective of the technology.
- Bitcoin is programmable money. The tech introduced a new form of money, which is programmable money. Bitcoin, as well as other cryptocurrencies operate under the same philosophy as past monies and money that people are more familiar with. What determines money is a shared rules set for value exchange. The difference with cryptocurrency is that the rules are determined by the payee and the payer. They decide the conditions and terms of the transaction that are codified. The system would and has begun to extend beyond cryptocurrency and ultimately enables a wide array of transactions, which include expertise, contracts, assets and services.
- Bticoin mining serves a couple of purposes. It enables the creation of new coins as well as facilitates transactions processing in the network. Mining requires energy, bandwidth and hardware. If mining bitcoins on a computer, the cost of electricity likely would outweigh the value of bitcoins that one could mine. Other cryptocurrencies also use PoW. Another emerging protocol is PoS or Proof of Stake that does not require energy or hardware to achieve consensus. Instead, it uses bonding or staking tokens in order to determine the next block.
- Bitcoin is not built out of thin air. Bitcoin is created via a process called mining. Blockchin, the bitcoin technology is made on top of, is dependent on a network of nodes, which ensures the integrity of transaction history through achieving consensus. Validation is one part of the process. After transaction validation, the nodes then have to race, using trial and error, to resolve a hard mathematical puzzle, which needs heavy computing resources. The first computer in the network, which solves the equation would be rewarded with bitcoins. This is known as ‘mining bitcoins’. This is a protocol referred as PoW or Proof of Work.
- Bitcoin has value. There would only be 21 million bitcoins made that’s deflationary and the opposite of paper money that’s inflationary. The value of bitcoin and security is derived from the fact that it’s easy to prove that considerable computing power as well as electric energy was expended to solve a puzzle in math. This protects from fraud and fake information. When bitcoin is built by PoW, the mining is authenticate and backed by a verifiable network.
- Bitcoin could be used for local and global payment. A vacuum existed for more efficient, faster and hassle free way of exchanging money. Bitcoin was the first cryptocurrency to fill the white space and was made for payments as well as storing value. This new form of money allows online peer-to-peer money transfers, with no need for an intermediary such as a bank. In general, bitcoin and other cryptocurrencies could be transferred quicker and with lesser fees.
During the earlier years of bitcoin, the bitcoin value chart could buy day-to-day items, like beer, coffee and dinner as well as transfer money for a few cents. The price was not so volatile and transaction time was fairly fast as usage on the tech was not high. The charm was that no banks of financial institutions were involved. It was particularly attractive if one wanted to transfer money to someone in another country.
Bitcoin, being the first successful programmable money on the blockchain technology, provide a virtual, universal and borderless cash, which is just the start. Bitcoin and blockchain did not just define the future of money, but it is also shaping the future of transactions and economies and the future, ultimately.