How are transactions carried out?
To be able to make purchases, sales or exchanges of bitcoin, you have to set up a digital wallet on an exchange platform that provides this service. These are operations carried out online (on platforms and accounts meant for this kind of service), just as if you were using your Home banking.
Every Bitcoin user has a wallet of which he or she keeps the cryptographic keys:
- The public key, which serves as an address to send and receive transactions on.
- Private keys, that are kind of like a digital signature to authorise the transaction with.
If a user loses his or her private key, he or she also loses ownership of the money and that amount will be unusable by anyone, because no one can access someone else’s wallet.
In order to send a certain amount of bitcoin to another person, the transaction must be authorised with the private key. At this point, the transfer is controlled by the network of connected computers, which solve complex algorithms to verify the identity of the users, that the sender actually has in his wallet the amount he wants to send and that there is no ongoing double-spending attempt. If all these conditions are met, the transaction is authorised and the data (day, time, user ID etc) are written on the Blockchain. The Blockchain is, therefore, a shared ledger. As soon as it is updated with the new data, an identical copy of this ledger is saved on all connected servers. If someone wants to tamper with the history of the recorded data, they should be able to modify thousands of identical copies!
The system is anonymous and, although there is a shared public ledger at the basis of the peer-to-peer exchange mechanism, in practical terms, each user only appears with their own ID. User addresses are made up of characters in random order and can be generated endless times. This guarantees absolute privacy to the identity of the users and, at the same time, the shared ledger guarantees transparency and authenticity of all bitcoin movements carried out from its birth to the present day.
But who guarantees the identity of users? Not all exchange platforms require it, but the latest generation ones, which comply with current regulations, require each user to complete the KYC when creating an account. The KYC asks for an identity card, a home address and all the information that proves that you are real people. This way, you are sure that behind the IDs of other users there are actually real people, whose identities have been verified.
How has bitcoin evolved?
Here are a few milestones:
- In 2009 1 dollar was worth 1309 Bitcoin.
- In 2013 1 BTC reached the price of 1.000 dollars for the first time.
- In 2017 it hit a historical record: 1 BTC was worth 20.000 dollars!
As we said, the economy created around bitcoins is still a small dimension, and little by little goods and services are beginning to be commercialised with this and other cryptocurrencies.
Many charities accept payments in BTC, some universities allow to pay taxes and in Switzerland, you can use them to pay for some public services.
What are the differences with traditional money?
The main difference with traditional currencies is that no one can decide the value of the bitcoin, because it is determined by the market and therefore by the demand-supply principle.
All movements are public, stored in a single and unchangeable database (the Blockchain), and are therefore safer and more transparent than exchanges of traditional currency.
Why has no crypto ever surpassed bitcoin yet?
Over the years, Bitcoin has proven to have a remarkable rate of security and integrity, becoming the world’s longest-running and best-known cryptocurrency. Its fame is such as to be defined as Digital Gold, it is the benchmark for all other cryptocurrencies, as well as the first entity through which people perceive the crypto world.
Bitcoin is a very decentralised cryptocurrency, since no one knows who Bitcoin belongs to and no one has absolute power over it. Moreover, it is native to the original Blockchain, so it does not need to rely on any other infrastructure.
Decentralisation is the real innovation of crypto, a feature that makes finance democratic. However, it is difficult to achieve it completely, because often behind a cryptocurrency there are creators who have a certain power and therefore control over it, or, in the specific case of bitcoin, the control ends up in the hands of “a few”: currently there are only 4 mining pools that control 58% of its Blockchain, the most powerful of which is in China.
The altcoins, the cryptocurrencies that arrived after the Bitcoins, wanted to compete with it in speed, applicability and capabilities, by trying to implement various innovative features. All these limits of bitcoin that the altcoins seem to have overcome, are actually advantages of Bitcoin and for its users. For example, its smart contract language, MiniScript, in comparison to Ethereum’s has rather limited applicability, but for this very reason, the Bitcoin infrastructure is less vulnerable than that of Ethereum or EOS.
Bitcoin, therefore, remains the strongest and most secure cryptocurrency and network, having it built every possible antibody over 10 years, and thus passing the most truthful test, the test of time.