“Blockchain makes cryptocurrencies the inevitable future of money.”
Joseph Muscat, Prime Minister of Malta
Bitcoin
And now I will tell you about the grandfather of all cryptocurrencies – about Bitcoin.
The emergence of Bitcoin was simply inevitable. Given that the gold standard was abolished in 1971, the economy became less stable, more prone to inflation, because the government can print money at its discretion that is not backed by gold. Money is now not backed up by anything. Bitcoin is also not backed by anything, but at least it is not controlled by the government, and the issue of coins is foreseen (21 million coins).
Bitcoin is a peer-to-peer payment system that uses a unit of the same name to account for transactions and a data transfer protocol of the same name. That is, this is both a payment system and a means of payment (if you do not go into the legal nuances of different countries). To ensure the functioning and protection of the system, cryptographic methods are used. All information about transactions between system addresses is available in open form.
How to start use Bitcoins
The minimum transmitted value (the smallest fragmentation value) – 10-⁸ Bitcoin – was named Satoshi in honor of the creator Satoshi Nakamoto, although he used the word “cent” in such cases.
By the way, Satoshi Nakamoto is a pseudonym, and there is no evidence that the creator of Bitcoin is from Japan. His famous report titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” also called Bitcoin White Paper, was released on October 31, 2008.
Electronic payment between the two parties occurs without intermediaries and is irreversible – there is no mechanism for canceling the confirmed operation (including cases when the payment was sent to an erroneous or non-existent address, or when the transaction was signed by a private key that has become known to others). No one can block (arrest) funds, even temporarily, with the exception of the owner of the private key (or the person to whom he has become known) and with the exception of court orders (such precedents are already known). But the provided multi-signature technology allows you to attract a third party (arbitrator) and implement “reversible transactions.” ¹⁰ No one controls Bitcoin, currency is emitted through the work of millions of computers around the world using a program for calculating mathematical algorithms.
For Bitcoins, you can also buy anything on the Internet, like for dollars, euros or rubles, and it also trades on exchanges. The most important difference between Bitcoin and all other forms of money is decentralization. This currency is not printed by the central banks and does not work according to their rules. Banks can issue as much money as they like to cover their national debt, thereby devaluing their currency.
On the contrary, the emission of Bitcoins is possible only in digital form, and anyone can begin to mine Bitcoins at any time. Bitcoin mining occurs through the use of computer power in a distributed network. When sending Bitcoins, transactions are processed by the same network, turning Bitcoin into an independent digital payment system.
Benefits of Bitcoin:
1) Decentralization – the process of sharing power, finances, or effort without the intervention of a global governing body. In the blockchain technology, the decentralization of control is because there is no local server in the system, and all the miners and participants in the chain of transactions are equal.
Developers do not follow the operations in the blockchain, and transactions are confirmed by network users. The technology involves the distribution of computing power and data across the globe, and the information is repeatedly duplicated to prevent loss, and DDOS-attacks on such a system have zero or minimal effect. ¹¹
2) The ability to send directly to anyone at any time.
3) The amount sent is almost unlimited.
4) Low commissions.
5) Nobody can block your account.
6) The transaction system can not be deceived or destroyed. Each transaction is confirmed by several independent nodes, which makes it impossible to substitute data or bribe the verifiers.
7) Anonymity.
8) Bitcoin is not subject to inflation.
Classical system
Bitcoin nentwork
The use of Bitcoin and cryptocurrency in the world
Since October 2017, the Swiss University of Applied Sciences and Arts in Lucerne has been accepting Bitcoins. The government agency takes the cryptocurrency as a payment for student accounts via Bitcoin Suisse AG. The university itself does not work directly with digital currency – a brokerage firm will convert incoming payments into Swiss francs weekly. Also, the intermediary assumes all risks associated with exchange rate fluctuations. The University of Lucerne is not the first institution that accepts payment in Bitcoins. Earlier, a similar decision was made by the Royal College of New York and the University of Cumbria in the USA. ¹²
In April 2018, it became known that the University of São Paulo, the largest institution of higher education in the financial center of Brazil, is launching a course on cryptocurrency. The course is launched against the background of a growing coverage of the topic of cryptocurrencies by Brazilian universities. The Sao Paulo based charitable foundation (Fundacao Getulio Vargas) announced that it would be the world’s first master’s degree in cryptocurrencies. ¹³
On July 23, 2018, there was news that the South Korean company Samsung, which is one of the world leaders in the development and production of telecommunications equipment, household appliances, as well as audio and video devices, will sell its products to customers in Tallinn, Riga, Vilnius and Kaunas with cryptocurrency. As the Lithuanian cryptocurrency payments platform CopPay reported, Samsung’s branded outlets will accept payments in Bitcoins, Litecoins, Ethereum, XRP, Dash, NEM and Steem. In addition, in the near future, cryptocurrencies will be accepted as a settlement tool in Samsung online stores. Samsung has long been working with the cryptocurrency sector. In January 2018, they announced that they would start producing video cards for mining. In April, the company reported an annual increase in production profits of 58% in the first quarter of 2018, which was partly due to the demand for mining chips.
In addition, Samsung uses the blockchain to manage its global supply chain. According to a Bloomberg report published in April 2018, the electronics industry trusts this technology to ship goods worth tens of billions of dollars a year, which reduces transportation costs by 20%.
A survey showed that small business owners believe that within two years, cryptocurrency payments will become a reality in the mass market segment. In turn, a study by eToro and London’s Royal College indicates that cryptocurrencies can become the accepted means of payment in the next ten years. ¹⁴
In early September 2018, the Japanese real estate company Ruden Holdings announced the results of its own experiment, in which it tested its recently created “platform for the real payments in cryptocurrency.” The experiment began with the seller indicating the property for sale, and the buyer – the application for the purchase. After, the buyer filled out an offer to purchase the property, which was confirmed by the seller.
“Then the buyer sent the virtual currency (Bitcoin) to the virtual currency account of Ruden. As soon as the Ruden (system) confirms the transfer of the virtual currency, we execute the contract and [convert]