What is Bitcoin?

What is Bitcoin?

Bitcoin is currently the leading global provider of cryptocurrency. Cryptocurrency allows users to safely and anonymously use the Internet to perform digital currency transfers and storage. In recent years, the Bitcoin network has attracted investors, businesses, and corporations while facilitating services and product deals. Moreover, Bitcoin has made itself the dominant source of decentralized cryptocurrency.

Satoshi Nakamoto is the creator of Bitcoin. This name was used for the first time in 2008 and it is still unclear if this is a real name or nickname. In 2008, he published an article about cryptography on a mailing list of the website “www.metzdowd.com”. The article introduced a kind of digital currency that later became Bitcoin. In early 2009, he released Bitcoin’s source code, along with binary code compiled on “www.sourceforge.net”.

Cryptographic currencies represent a growing asset class that has attracted much attention from financial communities. Cryptocurrencies are digital cash and payment systems that are encrypted in a blockchain system. The four main cryptocurrencies currently on the market are Bitcoin, Ethereum, Ripple, and Litecoin. The list is constantly changing as investors grow. Bitcoin, Etherum, and Litecoin use the same network of computers to store the same copies of all transactions. Therefore, the possibility of any anomalies is highly unlikely and the network is completely safe. Bitcoin is currently trading at the top of the cryptocurrencies list. Moreover, Bitcoin’s algorithm is used in most cryptocurrencies. Each cryptocurrency has its own rules concerning the maximum amount of money, currency production, privacy, transaction rates added to the blockchain, and the various mechanisms used by miners to compete among each other and earn rewards.

In June 2009, Nakamoto launched the peer to peer Bitcoin network that allows individual members of the network to track all transactions, and started to mine Bitcoin. During the early days of crypto mining, there were few miners in the network. Therefore, the mining difficulty was low . These few miners were able to extract huge amounts of Bitcoin. Franco’s study used a Bitcoin data analysis and discovered that Nakamoto extracted nearly 1,000,000 Bitcoins. Interestingly, none of these Bitcoins had ever been spent, but the reason behind it is unknown. However, it is obvious that as soon as these Bitcoins are spent by Nakamoto, his identity will be known, as blockchain transactions are trackable by everyone in the network and the transfer of these Bitcoins to a person can be tracked in the real world. Nakamoto deliberately created a decentralized network and stated that after the bitter experiences of the nineties and more than a decade of public trust in third parties and their systems, many people use a decentralized network. The creator of Bitcoin believes that within the next 10 years, digital currency will replace conventional currencies.

Bitcoin is a digital currency that uses protocols and cryptographic algorithms to determine the security of transactions and to create new ones. Bitcoin is the first transfer and transaction system that uses nodes and that does not use third party processing and confirmation of transactions. Bitcoin allows direct transactions between individuals, which is the main feature that distinguishes it from traditional currencies. The fact that Bitcoin does not need third-party agencies is one of the reasons for its popularity. This unique characteristic means that the entire system is decentralized. The network assumes that most nodes—which are, in fact, individuals—are honest and intercepts all transactions. The Bitcoin system does not have a mediating entity and no third party for managing transactions; therefore, several existing nodes process each transaction. These nodes are responsible for registering each transaction in a public ledger called a blockchain. The nodes that process transactions are called “miners” and the process “mining.” As compensation for the registration of each transaction in the blockchain, a reward is given to the miner. Miners perform the calculation needed to record the data and a completed and verified process chooses a miner as the winner to update the blockchain. Each participant has a revised version of the audit, and therefore, the entire system is decentralized.

Bitcoin is a decentralized electronic exchange system and represents a major change in the global financial system. Its system is based on peer-to-peer and cryptographic protocols and is not managed by any government or bank. It operates on the basis of a collusive and uncertain system in which all transactions are placed in an open ledger called blockchain. Due to limited resources, low transaction costs, and ease of transferring, Bitcoin has gained popularity rapidly in recent years across the globe. It has led to cryptocurrencies being recognized as an asset to the economy, and its reach extends to markets around the world.

Bitcoin is a fresh market that is still in its transition phase; therefore, a lot of fluctuations can still be observed. Due to its unstable nature, cryptocurrency prediction is not an easy task. Interestingly, based on the information provided from the website www.coindesk.com, Bitcoin has more than 50% of the market share in the cryptocurrency market at the time of this study. Therefore, studying its prediction is of great importance and researchers are becoming focused on it.

Source – Faghih Mohammadi Jalali, M., Heidari, H. Predicting changes in Bitcoin price using grey system theory

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