Santoshi Nakamoto published a white paper describing the Bitcoin network and the Blockchain Technology that was used to enable it. By common convention Bitcoin with a capital B, refers to the Bitcoin Network as a whole, whereas Bitcoin with lowercase “b” typically refers to digital assets of Bitcoin network. Since then Santoshi’s creation has flourished and spawned countless other “altcoin” along with new uses and applications for his Blockchain and derivatives.
Because Bitcoin network and Blockchain Technology has become a key component of Today’s digital economy, it is important for attorney’s and others to understand the basic terminology and features of this technology.
What is “Bitcoin”?
Infact , bitcoin is the digital asset, of bitcoin network and sometimes referred to as “virtual currency” or ” digital currency”. Unlike a traditional fiat (government supported) currency, a piece of paper, or dime metal coin, bitcoin is a digital asset that exists only electronically. Bitcoin is not the first electronic currency, we already have credit cards, debit cards, and online banking as digital currencies. Bitcoin is not the first “virtual currency” to exist. Coupons such as green stamps or ubiquitous airline Frequent Flyer miles are also virtual currencies. The once-popular virtual world, called Second Life, even had its own virtual currency known as “Linden Dollars.”
They say Bitcoin is more than a digital currency, it is “crypto-currency”. In other words, it uses advanced cryptography to protect your bitcoin from being stolen. Every bitcoin owner has a public key, which is the information anyone can see, like an account number, and a “private key”, which uses a secret number used to unlock the account for the transaction.
Blockchain Technology Enablement
In traditional bank accounts your balance is maintained in secret on a “private ledger”, typically a locked computer database in your bank. It is private because either you or somebody related can use it. Bitcoin differs because it is a private ledger -known as -Blockchain Technology – to ensure anyone participating in Bitcoin economy has a copy of every transaction that has ever occured. Blockchain Technology has proven to be very useful well beyond Bitcoin and has fostered alternative coin. The Bitcoin blockchain is maintained by a crowdsourced group of global “miner“. Solving the problem enables miner to add a “block” to “blockchain”. Miner typically controls substantial computer networks, often with special hardware developed specifically to solve difficult calculations.
What are the key attributes of ” Bitcoin”?
Firstly, it is pseudonymous, each account is identified only by its public number, so no name is necessarily tied to tied to the account.
Secondly, all transactions are transparent. Through its distributed ledger anyone can look up the balance in any account at any time. Indeed the complete transaction history of any specific Bitcoin can be traced from the day it was first mined.
Thirdly, it is independent of any and all government or central authorities.
Fourth, it is irreversible. Once a transaction is signed and added in a block on the blockchain, it cannot be reversed.
Take care about the Bitcoin Risks
Volatile: The price of bitcoin tends to be highly volatile. Because unlike the dollar when it was on the Global Standard, the value of bitcoin is not backed by anything other than the owner’s trust that someone else down the road will be willing to accept bitcoin in a future transaction for an acceptable value.
Regulation: In many jurisdictions, there is no regulation in bitcoin. In other jurisdictions, like the states of New York which seems to be bitcoin friendly, Bitcoin is the subject of balanced regulation designed to foster innovation.
No central authority regulating Bitcoin: There is uncertainty to Bitcoin Governance that can lead to chaos. Generally, the rules of Bitcoin are governed by the behavior of the majority of those participating in Bitcoin economy. It times, Bitcoin “forks” have occurred. In other words, when a substantial dissent arises with respect to a transaction, the blockchain may become forked into two separate blockchains. This happened recently when the Bitcoin network was forked, creating a new network called Bitcoin Cash.
What are altcoin?
Many other crypto currencies now exist that either copy or vary the basic software of the bitcoin. One of the earliest altcoin was the “litecoin”. A more significant altcoin is “Ethereum“. Ethereum is especially important because it enables “smart contracts” that is, contractual terms coded into the coin itself, as well as “tokens,” which code the coin to track other assets like inventory, stocks, or other items of value.
The Business models associated with Bitcoin, altcoins and blockchain technology continue to evolve and are likely to become increasingly important in our digital economy.