Bitcoins is a cryptocurrency, a form of electronic cash. It was designed to a digital currency: the system was designed to work without a central bank or a single administrator. The bitcoins are created and held electronically unlike the other currencies which can be printed in physical form like Dollars, Euros or Rupees. Bitcoin is a cryptocurrency which means it uses strong strong cryptography to secure financial transactions.
Bitcoin was motivated from the paper written by Satoshi Nakamoto. The idea was to create a means of exchange independent of central authority that could be transferred in a secure and verifiable way. Bitcoin supporters were sometimes criticized and seen as people trying to remove currency from the control of governments.
Bitcoin may be used to pay for digital transactions if both parties are willing. In that scenario it acts like conventional currencies. However it differs from traditional currencies in various ways.
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It is not centralized: One of the important characteristic of bitcoin is that it is decentralized. There is no institution that controls bitcoin. The network is run by a group of volunteer coders and run by computers from around the world. This system attracts some people who are not comfortable over the control of banks and governments on their money
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There is Limited Supply: Unlike the traditional currencies supply is unlimited, in case of bitcoin supply is limited. Central banks can print as many dollars they want. However, in case of bitcoin the supply is limited and controlled by an underlying algorithm. Every hour small number of bitcoins are released. This makes it lucrative as an asset because as demand increases with supply remaining constant, the value will increase.
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Privacy: Whereas senders of electronic payments are usually identified, this is not the case in bitcoins. Bitcoins operate in semi anonymity. The user do not need to identify themselves while sending bitcoin to another user. The protocol checks the previous transactions to confirm if the user is eligible to send the bitcoin.
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Fungibility: Each bitcoin is registered and publicly available in the block chain ledger. And this helps some users to discard coins coming from controversial transactions.
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Divisibility & Immutability: The smallest unit of bitcoin is called satoshi. Also, the bitcoin transactions are irreversible unlike normal transactions.