Cryptocurrencies have a lot of aspects to them. There are buying and selling, mining and trading. Since cryptocurrencies are a very new phenomenon, the concept behind them is probably as important as the other elements and information.
Bitcoin was created by Satoshi Nakamoto. Some people believe that Satoshi Nakamoto is one person. Others say that it is a group of persons living all over the world, including the United States, Japan, and Europe.
Satoshi Nakamoto published a paper about cryptocurrencies and peer-to-peer electronic cash in 2008, during the financial crisis that touched the lives of people from all over the world. The financial crisis of 2008 led to the bankruptcy of many world-famous financial institutions such as American investment bank Bear Stearns, American savings holding bank Washington Mutual, and three largest banks in Iceland that the country nationalized in October of 2008.
During the financial crisis, many of the central banks all over the world were determined to prevent the repeat of the Great Depression and the events that happened in the United States in the 1930s.
The banks of many countries started engaging in quantitative easing, which in simple terms means that they turned on the printing presses and started printing more paper money.
Most currencies in the world today are fiat currencies. This means that there is no gold or any other tangible assets behind them and national banks can print as much money as they choose.
Central banks flooded the markets with this new money. Because of this, in many Western countries, the interest rates have dropped to zero or nearly zero. The result of this was currency wars. Countries were competing as to who will devalue their currency faster and be able to provide cheaper goods, products, and services to the markets consisting of the neighboring countries and global competitors.
As a result of these wars and fluctuations, many banks were going out of business. The answer of the governments was the same as it has always been in the times of crises: the governments were bailing out the biggest banks in order to not let the entire system collapse, which was further devaluing the money.
In essence, quantitative easing is a transfer of debt from the government and big institutions to the public. In many countries, quantitative easing also resulted in significant increases in national debt and future taxpayer liabilities, which, in turn, led to a sense of social injustice appearing in many of the Western societies. What the banks were doing was trying to keep the wheels of the financial system turning no matter what. Because of this, the banks were taking actions with unknown future consequences. Many of the companies that have received the money from the governments during the bailouts were the reason why the financial crisis started in the first place.
This was the time when Satoshi Nakamoto decided that the moment was right for a new financial system, a system which does not depend on a limited number of global decision makers and people that get even more money when they lose money and put countries in trouble.
Bitcoin is based on the technology called blockchain. This technology has been open-source from the day of its creation. Bitcoin is an open-source currency, which means that any person, organization or country can come up with improvements and build systems and platforms around it.
Because of this, bitcoin is about much more than just creating a new payment method. It is about transparency, the involvement of all interested parties and use of underlying technologies.
During the last several decades, the combination of finance and technology has created a lot of troubles and issues. On the surface, it may seem that technological progress would empower financial markets to operate in a logical and analytical manner, yet to this day the behavior of the markets remains chaotic and largely driven by sentiment and emotion. There is no doubt in anyone’s mind that the current mainstream financial structure and markets are deeply flawed. Bitcoin and cryptocurrencies provide an alternative that is based on removing the power away from a few players and distributing this power among all players in the market, which is why decentralization is key when it comes to cryptocurrencies.
Decentralization means that the system behind cryptocurrencies doesn’t have an owner. In a cryptocurrency system, there is no bank that can decide on its own to flood the market with new money and make all other currencies fluctuate because of that.
The system behind bitcoin is a peer-to-peer system, which means that it doesn’t belong to any specific individual, government or organization. Bitcoin network consists of everyone in it. Without people using bitcoin, there is no bitcoin. At the same time, the more people use it, the better it works.
Bitcoin is a free market system. The price of bitcoin depends on how many people are using it and is governed by the laws of supply and demand. In total, there can be up to 21 million coins.
Bitcoin is not a regular currency because there are no paper or metal bitcoins. Bitcoin is a form of a digital currency. It exists only in the digital world. Users can store it in their virtual wallets or exchange it for regular currency.
Because bitcoin is decentralized, no government or official organization has any control over it. Any person or organization can accept payments in bitcoins and send payments in this digital currency. Because bitcoin is digital, it has no borders. There are also no transaction fees in the way you would have transaction fees with regular banks.
With bitcoin, there is no need for a regular bank account. A party can send payments to another party directly, without having to pay any fees.
One of the biggest advantages of the bitcoin system is that the data about the system is available to anyone at any time. All transactions occur in real time and have logs attached to them. Blockchain technology also allows tracking the origins and destinations of payments even during real-time movement of money.