One of the best cryptocurrencies released by far is Bitcoin. It is one of the largest digital currencies that have made its way into the mainstream. Undoubtedly, bitcoin’s invention led to plenty of opportunities for investors, but many controversies happened with the usage of bitcoin. People raised risks and security concerns with bitcoin usage, and in many countries, it is still not declared as a valid and legal currency. There have been many cryptocurrencies developed after bitcoin, but bitcoin has solved many problems of the financial world.
The main motive on which bitcoin was developed was to eliminate the need for intermediaries. Bitcoin was introduced as a decentralized digital currency that follows a person-to-person network and doesn’t involve government or financial institutions to authorize or verify the transactions. Bitcoin has offered a plethora of investment and money-making opportunities to users. Mining was the most preferred method by which investors make money and get the mining reward. As of 2020, the mining reward has been halved to 6.25 BTC.
In this article, we will highlight the problems that have been solved with the invention of bitcoin, which are as follows:
Inflation
Bitcoin is a computer code with a fixed number of coins that can ever be mined and has nothing to do with inflation. The supply of bitcoin is finite, which means there are only 21 million bitcoins that can ever be mined, out of which around 18.5 million bitcoins are in circulation. The price of bitcoin fluctuates according to its demand and supply in the market. With an item that has a limited supply, there is always an increased demand.
The process of mining isn’t that simple that it looks. The bitcoin miners are required to solve complex mathematical algorithms to earn the mining reward. The mining reward is set to get halved after every four years, and as of 2020, the reward has halved to 6.25 bitcoins. The mining complexity increases after a block are mined, and miners will consider the mining as worth the effort.
Physical loss
The main demerit of bitcoin’s wallet is that users who lose their private key lose their funds. It is estimated that bitcoin users have misplaced around 20% of mined bitcoins, and they can never be recovered, unlike fiat currencies. The loss of bitcoins occurs because of the loss of private keys and alphanumeric string addresses, also shortly known as a bitcoin address. All the transaction details are recorded in a distributed ledger known as a blockchain, and there is no central authority with a copy of transactions.
Accountability
Bitcoins and other cryptocurrencies can be mined and never be created, and most of the cryptocurrencies are owned by miners, and miners receive bitcoins as a payment to complete transactions. Bitcoins are not like fiat currencies under the control of the central government or tied or any valuable asset. The bitcoin’s market is very volatile, and its price is determined by demand and supply and not depends on currency traders or the stock market.
Counterfeiting
There is no threat of counterfeiting in the bitcoin network because the transactions of bitcoin and other cryptocurrencies are recorded on a distributed public ledger known as the blockchain. It is a public ledger, which means it is accessible to all users, and they have a history of transactions of all users. Every user can see the transaction history but can never know about a particular individual that has done the transaction through any platform like australiantimes.co.uk
The blockchain uses cryptographic principles that secure the transactions and data, and no one can access or manipulate the code or transactions that occur in the blockchain. It is next to impossible to counterfeit bitcoin because it nearly required more than 51% of computing power, which can never be achieved.
Transparency
Bitcoin’s blockchain is entirely transparent, and any user can see the transaction that gets recorded on the blockchain. However, a bitcoin wallet consists of a bitcoin address, public key, and private key to send and receive bitcoins easily. To carry out a new transaction, a private key is required that must be kept secret from others. Even if the bitcoin network is transparent, it will remain anonymous.
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