Introduced in 2009 by a person going by the alias Satoshi Nakamoto, Bitcoin is the very first form of digital currency in the world. After the invention and introduction of Bitcoin, it has gained a lot of popularity in the last decade. The concept of owning and utilizing cryptocurrencies such as Bitcoin has expanded above and beyond the community of cryptographers and left an impression on the general public, all around the world. Bitcoin’s ethos and blueprint hold a lot of potential to bring about major changes in the functioning of the monetary system, the Internet as well as the meaning, value, and utility of money. So, is the widespread popularity of Bitcoin and other forms of digital currency a revolution in the making? Read on to learn more.
The efficacy of bitcoin
Bitcoin is not tangible. It is not even a digital object. Bitcoin represents value. The value of the wealth you have is represented by bitcoin in a digitized manner on the Blockchain network as an ownership record. The components of the bitcoin network and their respective functions can help you understand the potential of the impact of bitcoin on business.
The network consists of three components:
- Bitcoin Blockchain
- Bitcoin transactions
1. Bitcoin Blockchain
The Blockchain technology that regulates the use and ownership of Bitcoins is a public ledger. This Blockchain forms the backbone of cryptocurrencies such as Bitcoin. What makes this database unique is the structure of this database. Information about Bitcoin transactions is all stored in blocks. Each block has a limited capacity. When that capacity is reached, the block gets chained to the network of existing blocks whose capacities have been reached. This decentralizes how information is stored. Although all the information is recorded, the identity and personal information of the individuals carrying out these transactions are not disclosed. This is what makes the bitcoin Blockchain highly secure as well as trustworthy. The entire concept of trust in society has been challenged and redesigned by Blockchain technology.
The information recorded by the uniquely structured database is stored in nodes. Nodes are the innumerable computers where this public record is maintained. Nodes get updated in real-time. The storage of information on these nodes is further evidence of the decentralized nature and security of bitcoin. The nodes cannot be controlled by any individual or organization or business.
Nodes are also responsible for ensuring that any transaction carried out with Bitcoins is valid. This means that nodes make sure that a person carrying out any kind of transaction with Bitcoins has the required money and is authorized to carry out transactions with the money.
Nodes function together to verify the validity of any transactions. So even if a user tries to make a transaction that is invalid, the nodes would not legitimize that transaction. This means Bitcoin has the potential to wipe out corruption.
3. Bitcoin transactions
The direct nature of sending and receiving money through Bitcoins has been a driving force in popularising the use of cryptocurrencies. No intermediary party is required to verify transactions made through the system. This means that even international transactions can be executed in a quick and cost-effective manner. Transaction information is maintained by the Blockchain and nodes verify all transactions. The ease of receiving and sending money can have a major socio-economic impact on the world. People can directly invest in foreign companies through ICOs, money can be sent to charitable organizations or individuals that need emergency support, conveniently and securely.
A makeover of the financial model
The events that unfolded during the financial crisis in the USA, in 2008, exposed the reckless activities of banks all across the US. People started questioning whether banks are trustworthy and whether these institutions are capable of storing their wealth securely. The centralized nature of the monetary system seemed unappealing to the masses.
The democratic nature with decentralized regulation of finances is the stand-out feature of Bitcoin that challenges the principles of the traditional monetary system. With Bitcoin and other cryptocurrencies, there is a heightened sense of control and autonomy that users experience over their wealth. Security of personal data and the pseudo-anonymity provided by the structure of the Blockchain all point to a paradigm shift in the functioning of the current financial model.
The introduction of Bitcoin as an alternative financial model is truly revolutionary.