What does bitcoin mean? Definition and characteristics.
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What does bitcoin mean? If you ask yourself that question, you are in the right place. To leave no doubts, we explain in detail the concept and definition of bitcoin, and each of its characteristics and properties.
Forget the typical concept of bitcoin as a digital currency that you will find on most specialized websites. Here you will find a technical and advanced definition of virtual currencies.
Definition of bitcoin
The meaning of the word bitcoin<\/em> can refer to several concepts. It depends on whether it is written in uppercase or lowercase.<\/p>
» Related article: If you want to delve deeper into the concept of bitcoin<\/strong>, we recommend reading the article about: What is bitcoin, how it works, and what it is used for<\/a>.<\/p>
Bitcoin is a currency, so it has properties similar to traditional currencies. However, it is born as a paradigm of the current financial system, breaking with the centralization of FIAT money. FIAT money is the currency established and regulated by a government or law. Its name comes from Latin and means "so be it". That is, the dollar, the euro or the pound are FIAT currencies. Historically, they had intrinsic value, as they were worth their price in the metal they were made of. Nowadays, it is not the case and it acquires the value that society confers upon it. A paper bill has no worth, but governments and people give it value... Eureka! Just like bitcoin. However, this electronic currency has certain particularities that differentiate it from traditional money. Below we present the main characteristics of bitcoin. Bitcoin, aside from being a currency, is the first peer-to-peer (P2P) payment network. These networks, also known as decentralized networks, allow for direct exchange of information (bitcoin, in this case) without intermediaries. In other words, transactions with this cryptocurrency are carried out directly between two people. Without banks, politicians, or governments in between. Since it does not depend directly on any central authority, it is considered decentralized. Do you know how your bank carries out transactions? Do you really know what your bank does with your money? When you purchase a digital currency, the money is yours and you store it in a wallet that only you control. When you send it, you send it directly to another digital wallet, which is also solely controlled by its owner. There are no intermediaries or banks that can speculate with your money or benefit from knowing how you spend it. The bitcoin is your money. You have complete control over it. In fact, the main goal of Satoshi Nakamoto, the creator of Bitcoin, was to define a digital cash. In addition to being decentralized, bitcoin is a deflationary currency. This means that there is a maximum amount of the cryptocurrency to be issued. Specifically, there will be 21 million of this currency by 2030. Until then, they will continue to be issued. Initially, 50 bitcoins were generated every 10 minutes. Every 4 years, the creation rate is halved. Currently, it is 12.5 bitcoins every 10 minutes. At the time of writing this article, there were 16,971,900 BTC. » Related article: Learn about the implications of bitcoin being a deflationary currency in the article on how many bitcoins are there. All of this makes the value of bitcoin not manipulable. Unlike current fiat currencies, which do not have this type of backing. Throughout history, many governments have stimulated the economy by issuing money. With more banknotes in circulation, the value of each one was lower, so you needed a larger amount to buy anything. In other words, inflation was created. This means that your savings in fiat currencies will lose value over time: things become more expensive, governments print more banknotes, and therefore, you need more money to buy them. This doesn't happen with cryptocurrencies, as they are not regulated and their value is determined by the market. The law of supply and demand governs prices. The Bitcoin protocol is completely transparent and public. The Bitcoin operation is disclosed, so that everyone knows how transactions are made. Anyone can know what Bitcoin is and how it works. In addition, each and every transaction made is published and can be consulted. The official website where ALL transactions are published in real time is blockchain.info. In the following image you will find an example of a Bitcoin. As you can see, each transaction reflects the date and time of the transaction and the amount transmitted. The transaction's date and time is known as the "timestamp" and is something strictly unchangeable within the Bitcoin network. The long numbers that appear are codes that identify the operation, the sender, and the receiver of that transaction. The anonymity of bitcoin is a controversial issue. While users argue that bitcoin is not anonymous, the media has spread news about the use of bitcoin by cybercriminals. What is true about all this? One of the goals of bitcoin is to prevent intermediaries, such as banks, from knowing what you do with your money and making a profit from it. It can be said that it was conceived as an anonymous cryptocurrency. Each bitcoin user is identified by an alphanumeric code, which is nothing more than the representation of their wallet. There is no direct relationship between this code and the real owner. No names, no location. That is why it is said that bitcoin uses pseudonyms. However, many people keep their cryptocurrencies in third-party virtual wallets, which allow them to store virtual money but also have your contact information. Some examples are Exchanges, such as Binance or Coinbase, which offer virtual wallets to their users. By using these services, bitcoin users are fully identified. In addition, all transactions are carried out through an internet-connected device. Everything you do on the internet is recorded, along with your IP, a device identification, where you are, etc... That is why, although the sender and receiver of a bitcoin transaction are not public, they are traceable. Despite this, it is also true that the use of bitcoin has spread to the deep web. If two people agree on a bitcoin transaction, they can do it completely anonymously. There are also computer programs to hide your IP, software for anonymous transactions, and even anonymous bitcoin cards. In these cases, although it may be possible to trace, it is much more complicated. However, the people responsible for bitcoin are working on it. The bitcoin protocol is constantly being updated. While the mother code that ensures decentralization is untouchable, the digital currency can undergo small modifications to improve its features and security. Among other things, programmers are currently working to ensure a 100% anonymous network, but with identifiable users if necessary. The bitcoin protocol is free and open-source. This means that anyone can suggest a modification to the code. All changes are agreed upon by thousands of expert programmers from around the world. This ensures that no one can introduce malicious code. Therefore, although the prevailing idea is that cryptocurrencies are completely anonymous, it is not the case: Bitcoin is NOT anonymous. Banks from all over the world and international companies have focused on bitcoin. This is mainly due to two characteristics that offer a clear advantage over traditional banking: Bitcoin is global and instant. What does this mean? On one hand, transactions occur on a network of interconnected computers, without distinguishing by country. This eliminates the concept of "international transfer". All transactions are treated equally in the bitcoin system. You won't be charged any extra fees. There are no borders in bitcoin. Bitcoin is global. On the other hand, ALL transactions take minutes to complete. Transactions propagate almost instantly on the network and are confirmed within minutes. In this case, traditional banking is also at a disadvantage. National bank transfers usually take 1 day to complete. If we're talking about international transfers, it gets more complicated. They usually take several days and have abusive fees. In contrast, bitcoin transfers are practically instant. The bitcoin protocol processes a block every 10 minutes. A little later in this article, we explain what "blocks" are. But to give you an idea, it's a list of all the latest bitcoin transactions made. Since it happens every 10 minutes, bitcoin transactions take a maximum of 10 minutes. After confirmation, a bitcoin transaction cannot be reversed. By anyone. And anyone means anyone. Not you, not your bank, not the President of the United States, not Satoshi, not a miner. No one. If you send money, you send it. No one can help you if you send your funds to a scammer or if a hacker steals them. There is no safety net. This has created certain problems. What happens if you lose your bitcoin password? What happens if someone dies? Who inherits the bitcoin? In these cases, these cryptocurrencies are lost. According to a study published by The Wall Street Journal, between 17 and 21% of bitcoins are lost. This is another challenge that programmers have to face: Rescue lost bitcoins. Too much information about bitcoin at once? Don't worry, it's normal not to understand everything the first time. In conclusion, we will review the most important properties that we have seen of the meaning of bitcoin: Did you find it interesting? Learn much more about bitcoin in our bitcoin guide.
Bitcoin Characteristics
Bitcoin is a decentralized digital currency
Deflationary Currency
The Bitcoin network is transparent
Is bitcoin anonymous?
Bitcoin is NOT anonymous. A transaction can be traced.
The bitcoin system is fast and global
How long does a bitcoin transaction take?
A bitcoin transaction is irreversible
Summary of the concept of bitcoin
