What's Behind Bitcoin?

IN 2015 the number of sellers acceptingBitcoin was over 100,000. Instead of the 2-3% usually imposed by credit card brands, sellers accepting Bitcoins often pay fees under 2% or even down to 0%. Companies accepting payments in Bitcoin are increasing by the day. At the moment, the list of Bitcoin friendly businesses includes Microsoft, Virgin Galactic, Expedia, Dell, PayPal, Subway, Wordpress and Newegg.

Bitcoin is a worldwide decentralized cryptocurrency. This means there is not a person or central authority or government behind it, either reinforcing or controlling it. Neither is it supported by material assets, such as gold. This might appear counter-intuitive at first: Who generates it then? how could it be if no one controls it?

The solution to this apparent contradiction is that Bitcoin is just a piece of software. The software has a developer (or developers) but his/their personal identity/identities is undiscovered as he/they brought out Bitcoin through a potential nickname, Satoshi Nakamoto. Anyway, Bitcoin is not controlled in a strict sense by anyone. The source code is delivered in the open source framework and so it belongs to the public domain.

One critical feature of Bitcoin is its decentralized nature. There is no central server or network of them where Bitcoin is running. Bitcoin runs through a P2P network of connected computers. Bitcoin is a technological discovery because it is the first decentralized cryptocurrency.

The Bitcoin network core is a distributed database keeping the transactions that have happened in the past and also maintains the current owners of the funds. Frequently, this distributed database is called a ledger because it saves the records that corresponds to the owners of the funds. Bitcoin is not the first distributed database to be released but it is the first one to accomplish the requirements of a financial database such as high-level security or file sharing. Indeed, financial databases need to be resilient against people trying to double-spend their coins, which Bitcoin avoids with solvency.

Bitcoin is not a Ponzi scheme. In a Ponzi scheme, there is a lead operator who pays the returns to existing investors for new inflows of funds. Firstly, there is no Bitcoin main operator that can obtain any kind of benefit from the relocation of funds. Secondly, there is no way to divert funds from new investments to pay returns. Bitcoin transfers are initiated by users at will: Bitcoin software cannot divert them from one user to another. Finally, a new investment in Bitcoin is always necessarily combined with a divestment. Investors mostly make transactions by means of a cryptocurrency exchange (Poloniex, Bittrex, Kraken and so on) where they purchase the bitcoins from another investor who is selling their investments.

However, there is a risk that the bitcoin currency could be a bubble. The bitcoin value collapses, stays or increases depends on whether Bitcoins will be used for different future applications. There are a lot of cool and promising applications for the Bitcoin platform, of which the most straightforward is a way of exchange and a repository of wealth. Anyway, the future of Bitcoin looks like a brilliant one. More and more people and companies are giving their trust to this technological proposal.