Bitcoin – A Peer to Peer Cryptocurrency

Bitcoin cryptocurrency coin representation
Since the creation of Bitcoin in 2009, there has been an astronomical surge in the volume and usage of private cryptocurrency.

Bitcoin is a peer-to-peer version of electronic cash which allows any two parties to transact directly and securely with each other without the need for a trusted third party.

A trusted third party, usually a financial institution (e.g. PayPal), acts as a central authority controlling a ledger in which both parties’ transactions are verified, updated and stored as a transaction record. In this model, when two parties transact, the trusted third party (ledger authority) ensures the ledger is balanced by debiting or crediting the relevant party. When both parties trust the ledger authority they are certain their transaction will be verified.

Bitcoin flow diagram
Bitcoin is a peer-to-peer version of electronic cash which allows any two parties to transact directly and securely with each other without the need for a trusted third party.

The third party also discourages double spending. This is because in a digital environment, the money we send or receive exists as a file which can be copied and sent to another business or even several other businesses at the same time.

This fraudulent activity is costly and reduces the trust in the third party. It may also be that the trusted third-party ceases to exists or is the one responsible for the fraudulent activity

Bitcoin Transacts on a Transparent, Secure, Peer-to-Peer – Decentralised Ledger.

Instead of having a central ledger authority the Bitcoin protocol distributes a copy of the ledger amongst all transacting parties.

This way one party won’t be able to cheat the other party as their copy won’t agree with all the other copies of the ledger available. All the parties in this network use consensus through algorithms to confirm that the transactions are legitimate.

Every party has access to the ledger giving it full transparency with an impregnable layer of security using cryptographic keys.

With this level of transparency and security the Bitcoin protocol eliminates the double spending problem along with unnecessary transaction costs and payment uncertainties associated with fraud.

Using the Bitcoin protocol as payment in a decentralised peer-to-peer network, eliminates the central authority (bank) and participants in this publicly accessible ledger can finally extract the maximum practical value from their transaction.

The Protocol

The Bitcoin protocol was created in 2009 and is by far the most successful cryptocurrency to date. It has received plenty of media attention and has a big reputation. In January 2018 has a total market value of $236,211,610,782 USD.

Many experts believe that Bitcoin will have a significant influence in the future development of payment and financial systems.

Bitcoin symbolBitcoin can be identified on exchanges most easily through its Icon but also the trade symbol BTC. 21million bitcoins exist and there will never be more. As they get less their value increases. Other factors also affect their value, for instance if a big company such as Microsoft adds a payment instrument that allows their customer base to use bitcoin to purchase products and services from them.

 

Next, well explore what you will need in order to buy Bitcoin.

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