The concept of bitcoin is difficult to define in a word. Because we need to know a lot of concepts on the ground. Let's dig into bitcoin which is representative of cryptocurrency.

First of all, I will go over the concept of money.

What is Money?

• [Noun] <Economy> A measure of the value of exchange of goods, generalized means of mediating its exchange. Coins, banknotes, and so on.

There are many kinds of currencies in addition to the dollar, which is the currency we use in the world. Let's take an example.

Let's say you play Overwatch. To buy a character's skin, you need to pay a certain amount of 'league tokens'. It's a deal with a 'league token'. It is not real money, but we can see very often that we buy and sell goods or services in limited space. The 'league token' is not a legal currency but a kind of 'digital money'.

So what about bitcoin? It is also known as 'digital money' or 'virtual currency' because it is a currency that is not a paper currency, In addition, it is also called 'cryptocurrency' in the sense that it uses money with excellent security technology and encryption technology. Nothing is wrong. 

Birth background of bitcoin

So, how did the bitcoin with a lot of controversy about the name come about? I am going to the US subprime mortgage crisis in 2007.

At the time of the subprime mortgage crisis, US super-large mortgage lenders went bankrupt, and this caused a global credit crunch that adversely affected the real economy. The key currency, the dollar, has plummeted, prices have risen, and interest rates have bottomed out. There was hyperinflation. We have witnessed the collapse of the dollar, the key currency. The United States has implemented a quantitative easing policy to remedy this. The US federal bank that has the currency issue right took out the dollar and used it to repay the debts of the company and the country that have become insolvent.

Satoshi Nakamoto, who developed bitcoin for the first time, seems to have dreamed of a change in the dollar-based system of money. Distrust of the state, distrust of the government, distrust of the dollar, and these were the occasions for making bitcoin.

Bitcoin is different from PayPal, which is an online payment platform. PayPal allows you to make payments to any Internet shopping mall around the world, regardless of currency or bank type, but the system has its owner. It was a payment instrument that was constrained to be centrally controlled by someone. The financial crisis caused by the subprime mortgage crisis has caused many people to become unemployed. This case was caused by the 'deep pockets' that hold the international financial environment. This awareness has led to the idea of implementing a money system that is managed by people.

"What is needed is an electronic payment system based on cryptographic proof instead of trust,"
- Sathoshi Nakamoto, "Bitcoin: A Peer-to-Peer Electronic Cash System" 2008 -

Features of bitcoin

The bitcoin is made and released to the world. There is no restriction on the border, and even on the day when the bank breaks, there is almost no commission paid. The money without the owner, which is traded without the intervention of the government, the central bank, and the financial institution, comes into being. Bitcoin can prevent fraud, such as forgery or duplex, without the involvement of a third party such as a bank. Bitcoin transactions are recognized as reliable transactions without any control, thanks to network technology called blockchain.

Since there is no owner, bitcoin does not have a clear issuing agency. Instead, anyone can get a bitcoin through a task called mining that solves a complex function. Mining is the process of solving math problems with a computer. However, the problem to get a bitcoin is very difficult, so it takes about five years for a general PC. The difficulty of mining is getting higher and higher. So a mining expert or company with a server-level workstation emerged. There are many brokerage sites that can trade cryptocurrencies such as bitcoin, ethereum, and so on.

The bitcoin system generates currency and supports transaction authentication, but does not support exchanges with other currencies. Therefore, it is possible to trade between common currency and bitcoin only through a separate exchange, like Bitforex, Binance, and Bitfinex. Bitcoin can deal with non-face-to-face as well, and the number of shops and people who appreciate the value of it makes it increasingly popular. In Japan, there is an increasing number of franchisees that pay for bitcoin. With a bitcoin you do not have to calculate the exchange rate, but there is a fee. It is a system that goes back to the person who took out the first bitcoin.

Bitcoin based on blockchain technology has clear limits despite innovativeness.

<Limit of bitcoin>

1. Due to the nature of the blockchain, transaction cancellation is not possible if transactions are approved and the transaction contents are stored in the blockchain
2. We do not ask for personal information, but because the transaction is open to everyone, we can track if we know who owns the bitcoin address, so we can not guarantee the confidentiality of the transaction itself.
3. There is no way to revoke a private key containing a bitcoin if it is stolen or lost.

Due to these limitations, there is the development of so-called altcoins, such as Ethereum, which has built a new blockchain network.

There are also various national differences in bitcoin. In the case of Russia, all transactions using bitcoin are illegal, but Japan has introduced regulations on the Money Laundering Act and has actually recognized the transaction. In Korea, discussions are still in progress. 

Conclusion

Bitcoin is still at the center of controversy, but I think it has great significance and value in that it changed the paradigm of currency. The purpose of Sathoshi Nakamoto's development of bitcoin was probably to make the world a better place, with social rights enjoying the freedom of privacy and the right to participate in financial related democratic procedures. I do not think Sathoshi could have anticipated the controversy over speculation. Bitcoin, I just wonder if it was a dangerous experiment or a great experiment.