Bitcoin is a global payment system and the first decentralized virtual currency, which provides fast, cheap, and highly private payment services for everyone. Bitcoin is an open-source protocol developed and launched based on a white paper written by Satoshi Nakamoto (Satoshi Nakamoto; translated: Tetsushi Nakamoto). Since its release, Bitcoin has become the industry’s most well-known, mature, and leading cryptocurrency, which inspired the birth of other digital currencies-Altcoin. Bitcoin’s many advantages, such as speed and cost-effectiveness, compared to currently used traditional money transfers such as SWIFT, have led today’s leading companies to adopt this digital currency as a payment method, and a number of corporate activities, such as employee salaries or international invoices, are being carried out in cryptocurrencies.
CHAPTER 1 – INTRODUCTION TO BITCOIN
Introduction to Bitcoin
Any individual or company who wants to get integrated with cryptocurrencies must have heard the news media report on Bitcoin, which can also be said to be synonymous with various virtual currencies.
Bitcoin often talks about mining and miners; what does it mean to mine? How can I integrate with Bitcoin as a business to send or receive money? How can businesses use Bitcoin to accept payments or pay employees’ salaries?
What is Bitcoin?
Bitcoin is a decentralized virtual currency, also known as digital cryptocurrency. As a form of “online currency” different from physical currency, it transfers funds through a network. In the past few years, Bitcoin’s status among consumers, governments, and financial traders has gradually improved. Bitcoin is now the world’s largest digital cryptocurrency, not only in terms of market value but also in its popularity and attractiveness.
Bitcoin is the first virtual currency to be launched, and it is also the virtual currency currently ranked first in market value. It was proposed in 2009 by an individual or group signed by Satoshi Nakamoto, who is considered the inventor of Bitcoin, and whose identity is known to have presented the idea and protocol of Bitcoin in the paper “Bitcoin: A Peer-to-Peer Electronic Cash System” in 2008.
This type of virtual currency is not issued by all the central banks or government agencies. It can only be traded, transferred, and stored electronically (on the Internet), in other words, they are a string of codes.
Bitcoin uses blockchain technology to record transaction data. , Each data has the characteristics of high security and anonymity, and it is not easy to tamper with the data.
Nowadays, virtual currency is not only Bitcoin but a digital currency with many characteristics. It has been springing up all the time, but Bitcoin still has an unshakable position in the importance of many virtual currencies.
The meaning of Bitcoin can be understood from two aspects. One is the currency itself, and the other is the P2P peer-to-peer network that supports the entire system.
The value of Bitcoin depends on its popularity, which is largely affected by the following factors:
- Bitcoin’s volatility is well known
- Bitcoin has a limited supply, which means its price is greatly affected by demand fluctuations.
- Bitcoin, as a relatively new market, is inherently attractive
- Bitcoin’s overall long-term potential
- In terms of value and market capitalization, Bitcoin is at the top of the digital cryptocurrency market.
Alternatives to Bitcoin (Altcoins)
Bitcoin was the first digital cryptocurrency, but since its development, thousands of competing new digital cryptocurrency forms and technological applications have sprung up like mushrooms after the rain. These other currencies are collectively referred to as “alternative currencies” or “altcoins” and differ from Bitcoin in one or more key features:
Namecoin is the first alternative currency to appear. It operates in the same way as Bitcoin, but it can be used as an alternative domain name registration system.
Ripple is the alternative currency with the largest market capitalization. The developers of Ripple claim that the digital cryptocurrency can complete transactions in 2-5 seconds, which is much faster than Bitcoin.
Litecoin is the first digital cryptocurrency to try to perfect Bitcoin: that is, to reduce the time to mine a single equation system and increase the amount that can be mined.
How Bitcoin Works?
Bitcoin is a decentralized peer-to-peer virtual currency, where “decentralization” means that there is no single institution that supervises Bitcoin. On the contrary, it operates according to the principle of majority. A transaction must be verified by at least 50% of the machines on the network before it can be considered valid.
“Peer-to-peer” refers to the ability to send Bitcoin to other users on the network without any intermediaries such as banks or third-party payment intermediaries. For example, as an individual or a business, accepting Bitcoin as a payment allows customers to make payments very quickly, cost-effectively, and securely, without involving any third parties.
Example of Bitcoin Operation
At a very basic level, Bitcoin works in the same way as many other currencies in the world. As long as the merchant is willing to accept it, customers can use it to exchange goods and services with the merchant. In addition, people use virtual wallets to keep their bitcoins, which is not much different from a physical and traditional wallet.
When a customer wants to make a transaction with Bitcoin, the only thing is to open a Bitcoin wallet and then send the agreed amount of Bitcoin to the merchant. Bitcoin transactions use “private keys” to confirm exchanges between wallets, which helps improve security.
When the transaction is completed, the miners will package these into a “block” and then use a hash function to perform calculations and encrypt them to generate a unique signature. Hashing is a very important part of the way Bitcoin works. Simply put, all transaction data in a specific block is compressed into a code that can be read and easily distinguished. This string of codes is called a hash value.
The block containing the hash value will be broadcast to the network for verification. If the verification is valid, the block will be added to the “blockchain” for others on the network to view.
The fact that some travel companies and food stores have already accepted Bitcoin as a payment method shows that Bitcoin is being used in many transactions. According to public records, the first Bitcoin transaction for commercial payments occurred in 2010, when an engineer paid 10,000 Bitcoins when buying two pieces of pizza. After this, in December 2017, the highest value of the same 10,000 bitcoins could reach 1978.3 million U.S. dollars.
What is the blockchain?
A blockchain is a chain formed by connecting blocks from end to end. Each new block contains the hash value of the previous block. The blockchain in Bitcoin is a public record of all Bitcoin transactions. When a new block and its hash value are verified by at least 50% of the light node, full node, and super node network, it will be added to the block. The chain is available for all other users to view.
This kind of transparency is one of the most attractive aspects of the Bitcoin network because it means that everything that happens on the network, including every transaction, every change in the system, and even the whereabouts of every Bitcoin, can be made available to everyone, which can drive people to trace back to the first generated block, the genesis block.
Where do Bitcoins Come from?
Bitcoin is generated through a process known as mining. Miners, using specialized computers, validate and package transaction records into blocks, which are subsequently added to the blockchain. Through a competitive process, miners solve complex mathematical problems to create and verify new blocks, earning Bitcoin rewards. The total supply of Bitcoin is capped at 21 million, with an estimated completion of mining around 2140. Mining Bitcoin demands significant computational power and high energy consumption, often leading miners to combine their resources into mining pools to increase their chances of earning rewards. This process ensures the creation and circulation of new bitcoins, continuing until the entire supply is in circulation. Each mined block not only secures the network but also provides an opportunity for miners to earn Bitcoin rewards, thereby incentivizing and sustaining the Bitcoin ecosystem.
CHAPTER 2 – GETTING STARTED WITH BITCOIN
To purchase Bitcoin, follow the instructions below:
- Selecting a Cryptocurrency Exchange
To buy Bitcoin or other cryptocurrencies, a cryptocurrency exchange where sellers and buyers meet to trade fiat currencies for coins is essential.
There have been hundreds of platforms to select from; however, a better pick would include a better combination of ease of use, low fees, and strong security.
- Choose a Payment Option
Different payment options, such as direct deposit, Google Wallet, electronic payments, a virtual currency wallet, or maybe even a prepaid card may come with extra processing expenses. For example, while write transfers charge $10, the same transaction with PayPal costs 3.5 percent.
Things grow considerably more expensive if buying cryptocurrencies directly using PayPal or a debit card rather than first filling crypto account and then utilizing transferred funds: The cost on some exchanges has increased up to about 3.99 percent of the transaction value. Service charges for credit cards are frequently at least as expensive on other websites.
Make a Purchase
Once the wallet has been funded, the orders may be placed for the first Bitcoin purchase. Depending on the system utilized, this purchase might well be able to be realized instantly by clicking a single or may require buyers to enter the Bitcoin trading screen. The next step is to input the desired quantity.
To acquire a Bitcoin at the current price of $38,000, for example, the buyer needs to spend $38,000. Entering less money, say $1,000, will result in obtaining a proportion of a Bitcoin, in this example, 0.026 percent.
- Choose a Secure Storage Option
A crypto exchange most likely includes an integrated Bitcoin wallet or, at the very least, a favored partner where the users may store their Bitcoin securely. On the other hand, some users are wary about keeping their crypto linked to the internet, which hackers may take more quickly.
Most large exchanges have private insurance to pay customers in the event of a breach, and they’re gradually holding the bulk of user assets in offline “cold” storage. People may keep their Bitcoin in an online or offline wallet of their choice depending on their desire for security. However, a withdrawal transaction from an exchange may cost users to be charged a modest withdrawal fee. Furthermore, if utilizing a third-party crypto wallet custodian, the users may lose access to their coins forever in case of lose the private key that acts as the wallet password. Some Bitcoin billionaires have been robbed of their wealth due to this.
Can I Change My Mind about a Bitcoin Transaction?
Once uploaded, it is difficult (if not impossible) to delete data from the blockchain. Therefore, after completing a transaction, it cannot be undone. Therefore, always double and triple-checking that money is being sent to the right address is crucial to ensure the security of transactions.
Bitcoin Payment Adoption
Integrating Bitcoin into digital commerce marks a significant shift towards efficient, secure, and decentralized transactions. As a payment gateway service provider in the cryptocurrency space, Bitcoin’s evolving utility landscape aligns closely with the core ethos of improving transaction efficiency and security. Bitcoin’s decentralized nature fosters secure, peer-to-peer transactions, reducing reliance on intermediaries and lowering transaction costs.
Bitcoin’s adaptability to enable innovative business models and loyalty programs parallels the forward-thinking approach that Bitpace strives to bring. The discussion of Bitcoin’s functionality in commerce deeply intersects with the core goals and aspirations of companies in the payment service provider space, underscoring the ongoing mission to revolutionize traditional financial models.
Booking a Private Jet with Bitcoin and Cryptocurrencies
Cryptocurrencies, which are used by many companies around the world, especially in 2021, and stand out with some functions such as speed, convenience, and costlessness, are already used in many sectors and by large companies, while many private jet charter companies with luxury status have accepted these payment units.
Chartering a jet using cryptocurrencies offers a level of privacy and security that is in line with the decentralized nature of digital currencies, which not only appeals to individuals seeking a seamless and discreet travel experience but also reflects the increasing integration of blockchain technology into traditional industries. As the crypto market continues to mature, the combination of charter jets and cryptocurrencies represents a dynamic shift in the way wealthy individuals approach and execute their travel plans.
Burger King launched “Huabao Coin” to play cryptocurrency marketing
Burger King currently supports cryptocurrency payments in Germany and Venezuela. Not only that, but Burger King also launched its cryptocurrency, “WhopperCoin,” in Russia, showing its ambitions for cryptocurrency.
Burger King has partnered with Robinhood, an online securities trading platform, to launch a three-week membership lottery. As long as they order food on Burger King’s App and spend at least $5, the customers will have the opportunity to get Dogecoins of varying value. Ether or Bitcoin winners can receive it through an approved Robinhood account. Burger King stated that this event would provide 20 Bitcoins, 200 Ethereum, and 2 million Dogecoins as rewards, with a total value of more than 1.4 million U.S. dollars.
However, it would not be the first time that such playful approaches have involved such heavy money with Burger King. Today, many gaming apps that incorporate cryptocurrencies, such as Decentraland, which is a virtual reality platform built on the Ethereum blockchain, have reached valuations in excess of billions of dollars.
Tesla once opened Bitcoin car purchases
Elon Musk, a global iconic cryptocurrency supporter, announced in March (2021) that he will officially open the purchase of Tesla with Bitcoin. Unlike other brands, it is through the conversion of cryptocurrencies. When spending in cash, Musk wrote to the community at the time, “If you buy a Tesla with Bitcoin, the payment will be calculated in Bitcoin and will not be converted into legal tender.”
However, the plan only lasted until mid-May. Musk once again stated that considering the “environmental protection” issues caused by mining, he would stop opening up cryptocurrency to buy cars, but at the end of last (October), Tesla reported to the official In the quarterly documents submitted it is implied that Bitcoin car purchases will be opened again.
Amazon can also use cryptocurrency to “indirectly” pay
In addition to the above brands, there was a rumor in the market in July this year that Amazon, the global e-commerce leader, was considering opening up cryptocurrency consumption. Although Amazon has not yet opened cryptocurrency payments, consumers can use cryptocurrency debit cards (Cryptocurrency Debit Card) or Bitcoin to purchase Amazon gift cards at Bitrefill.
Bitcoin got approved as a legal tender for the very first time; both McDonald’s and Pizza Hut can consume
Another major event in the cryptocurrency currency circle occurred in September 2021: El Salvador became the first country in the world to use Bitcoin as a legal tender. In line with the country’s new system on the road, local chain groups such as McDonald’s, Pizza Hut, Starbucks, Zara, etc. have all announced the acceptance of Bitcoin payments, and these transactions are mainly through the Lightning Network (The Lightning Network) provided by the Bitcoin payment platform OpenNode.
Bitcoin price volatility
Under the influence of supply and demand factors, the volatility of Bitcoin price is relatively obvious, and the market demand has also seen a trend of ups and downs in recent years.
Although supply factors have less influence than demand factors, they are equally important in explaining Bitcoin’s volatility. The supply we mentioned here does not refer to the total number of bitcoins available for mining but refers to the number of bitcoins currently being exchanged or traded in the market.
If the supply of these bitcoins in circulation changes drastically, the current market price will be greatly affected. For example, in the Bitcoin world, “big whales” hold large amounts of Bitcoin.
If one of the big players decides to sell their bitcoins to the market, the sudden increase in supply may cause bitcoin prices to fall and volatility levels to soar. Of course, the premise of this assumption is that the demand remains constant.
The sudden increase in Bitcoin available for exchange will lead to a rise in liquidity, which in turn will affect the volatility of Bitcoin. This is because, under normal circumstances, the market for direct buying and selling of bitcoin is not as liquid as the market for trading bitcoin price trends, but the current market price of bitcoin is based on direct buying and selling of bitcoin.
Bitcoin liquidity
Bitcoin’s liquidity is one of the first factors traders consider before entering this market. As we all know, Bitcoin (and digital cryptocurrencies in general) is significantly less liquid than more traditional markets such as foreign exchange.
Some people are not familiar with the framework that supports Bitcoin at all. Terms like blockchain, mining, and nodes can even discourage professional market analysts, let alone ordinary daily traders. Therefore, Bitcoin and the broader digital cryptocurrency market have not attracted the same level of traders as the more mature and easier-to-understand markets.
Reduced liquidity might introduce a certain complexity in identifying a suitable counterparty for engaging in Bitcoin transactions, making the buying and selling process less straightforward. In other words, as long as the price of Bitcoin suddenly rises or falls, its volatility will immediately soar.
Why Do Businesses Use Bitcoin?
The cryptographic technology underlying Bitcoin ensures transparency and trust within the transaction process, critical aspects that Bitpace aims to enhance within the payment solutions space. In addition, Bitcoin’s borderless capability allows for seamless global transactions, a feature that aligns with the overarching goal of providing accessible and efficient payment solutions for goods and services across geographic boundaries and provides solutions to the following common challenges in daily life posing a different set of obstacles when conducted in traditional currencies.
Bitcoin, as a way of payment for international invoices
Bitcoin’s borderless nature makes it a convenient and cost-effective solution for businesses with international transactions. By accepting Bitcoin, businesses can bypass traditional banking systems, which often involve high fees and long processing times. Instead, Bitcoin transactions can be completed quickly and securely, allowing for near-instantaneous settlement. In addition, Bitcoin’s decentralized nature ensures that transactions are not affected by exchange rates or government regulations, making it an ideal choice for businesses operating in multiple countries.
Bitcoin, as a way of payment for employee salaries
Many employers are paying their employees’ salaries in Bitcoin, given its advantages over traditional currencies. As more companies accept Bitcoin as a form of payment, employees can more easily convert their Bitcoin salaries directly into fiat currency or use it to make purchases, which eliminates the need for intermediaries such as banks or payment processors, reduces transaction fees, and streamlines the payment process. In addition, using Bitcoin for payroll payments can benefit companies in terms of cost savings and operational efficiencies. By eliminating the need for traditional banking systems, companies can save on transaction fees and avoid the delays and complications associated with international transfers.
Bitcoin wallet
Bitcoin wallets are equivalent to bank accounts. Unlike traditional bank accounts, Bitcoin wallets are extremely easy to set up and do not require authentication. There are two forms of wallets: software wallets, which are built on the computer’s hard drive, and online wallets, which are built on cloud servers.
Various methods exist for depositing Bitcoin into a wallet, yet it’s often observed that exchanges and individuals tend to avoid accepting credit cards or PayPal due to concerns about potential fraud. Consequently, the more prevalent options for purchasing Bitcoin involve using bank transfers or Bitcoin ATMs.
For most users, Bitcoin operates in the same way as most electronic payment methods, such as PayPal. Special software is used to create Bitcoin wallets on personal computers, tablets, and mobile phones. A Bitcoin wallet can be used to pay for individuals or websites that accept online currency such as Bitpace, a cryptocurrency payment gateway providing fast, reliable, secure cryptocurrency payment services.
However, unlike other electronic payment methods, Bitcoin is not associated with traditional currency (unit of currency). Bitcoin operates through a specific set of equations, and every Bitcoin currently circulated is in this database. The Bitcoin transfer record will be recorded in the Bitcoin equation by code, and the character sequence generated at one time will contain the corresponding transfer information.
Since each # number contains the transfer information being processed or before, it is extremely easy to distinguish any fictitious code. This is because while Bitcoin information is open to the public, it can maintain its security.
All types of crypto wallets
It is very important to understand each type of Bitcoin wallet and clearly understand their functions or advantages. This is because only after that can they choose the correct type of wallet to store, send, or receive coins. Therefore, everyone ready to start buying or performing anything related to Bitcoin needs a wallet. All varieties of wallets are explained here to assist crypto novices in various ways.
- Hardware Bitcoin wallet -It is the safest type of all other wallets. It saves Bitcoin on a physical block, which can be accessed by connecting a computer via a USB connection. This type of wallet is mainly used to protect Bitcoin from viruses or all other risks. The crucial thing to remember is that only hardware wallets are not free.
- Mobile wallet – In such a wallet, the user can get the best remittance function, which is touch payment. Not only that, but users of mobile Bitcoin wallets may also interact via NFC (near-field communication) just by scanning a QR code. All these wallets are only compatible with Android or IOS-compatible phones. As Bitcoin wallets can potentially contain major malware, choosing the right wallet after thorough research is of utmost importance.
- Desktop wallets -After coming to desktop wallets, the first thing to know is how these are similar to mobile wallets. These are used after being installed on the computer desktop. These wallets are used as addresses for all users, which are necessary to send or receive bitcoins. The most important aspect of a desktop wallet is that it helps the user keep track of their private keys.
- Web wallet or online wallet – This is the last and last type of wallet stored Bitcoins. People may use these wallets to access Bitcoin anytime and from any location. These are simple and may be launched on any browser or device. Selecting an online wallet is a practice to be cautious because private keys will be stored online.
Use a cryptocurrency exchange to purchase Bitcoin
Bitcoins bought via an intermediary will be possessed personally, and the user will be able to benefit if the value of Bitcoin increases. However, if the market outlook price drops below the entry price, then choosing to close the position at this time will constitute a loss.
The bitcoins that people buy through exchanges can be used for transactions on the internet, which is the mainstream way for most people to obtain bitcoins. The prerequisite for buying Bitcoin from an exchange or holder is that the purchaser must have a wallet. As long as the provider accepts Bitcoin payments, anybody on the network can use Bitcoin to conduct transactions.
Derivatives on Bitcoin
Dealing with Bitcoin derivatives is betting mostly on the price movement of the cryptocurrency using financial products such as CFDs. The user will not own any Bitcoin, so it will not be added to their wallet.
However, in any case, derivatives trading is one of the main channels for people to access the price of Bitcoin. They can either go long when predicting future price increases or go short when they bet on future price declines.
Leverages can be used to establish a Bitcoin position; that is, a user only needs to pay a certain margin to get a complete market risk exposure. In our case, the margin requirement for Bitcoin is 50% of the total value of the transaction.
Bitcoin mining
Operation costs and the returns to be brought by building the mining system should be considered for making profits through Bitcoin mining. The risk of mining is to spend a lot of money on computers and electricity, but this does not guarantee that a miner can first calculate the hash value that meets the requirements, meaning a Bitcoin reward is not guaranteed.
As more than just a result, many mining groups combine their funds to boost their prospects of success. This is the so-called mining pool, which comprises multiple individual miners.
What is Bitcoin double spending?
One of the concerns that people have with early digital cryptocurrencies is double-spending. For example, someone might try to use the same Bitcoin to pay for multiple transactions simultaneously.
Since this Bitcoin can only be used to pay for one of the transactions, other people who sell services or goods will not receive the payment. This situation will inevitably undermine people’s trust in the system. In addition, just like counterfeit banknotes, double spending on Bitcoin can cause inflation and cause Bitcoin to depreciate.
However, this worry is not without a solution. We mentioned earlier that light nodes, full nodes, and supernodes would perform verification steps on transactions. Coupled with the transparency of the blockchain and the accessibility of transaction information, forging transaction details is already It’s almost impossible.
Unless there is an extremely rare situation, that is, a user or group controls most of the nodes in the network. If this happens, they can brute force to verify and approve the forged transaction.
For example, they can revoke any transactions that occurred during their control of the Bitcoin network so that they can reuse existing Bitcoins or use the blockchain to go back to historical transaction records and make changes to the transaction details.
However, because the blocks in the blockchain are interlocking, and the next block must contain the hash value of the previous block, as long as one of the blocks is modified, then all the blocks behind it All blocks have to be recalculated to a new hash value. Hackers who want to tamper with historical transaction data must generate new transaction history records for the entire blockchain.
Considering the number of nodes currently used to verify transactions and the different levels of verification provided by light nodes, full nodes, and supernodes, it is unlikely that the so-called “51% attack” will occur. Furthermore, when additional nodes for validation are connected to the system, the network will become more decentralized.
It will be more difficult for a single individual or organization to control the majority of the platform’s nodes due to this. The Entire network has never really been subjected to a 51 percent assault.
CHAPTER 3 – COMMON BITCOIN MISCONCEPTIONS
Is Bitcoin Held Anonymously?
Although the Bitcoin address and protocol level do not reveal the identity of the user, and no one needs to submit any personal information during the transaction, complete anonymity is quite difficult because each operation on the Bitcoin system is documented on a public ledger, which only includes details well about key pairs and the quantity of exchanged currency but is still linked to a digital account. The transaction information will be visible to the wallet provider as soon as any personally identifiable information is connected with a Bitcoin wallet.
Legal Status and Regulations of Bitcoin
Since cryptocurrencies are decentralized and are not controlled by any central authority of the government, this peer-to-peer payment system is very attractive to representatives of law enforcement and financial institutions. Many countries are still trying to decide how to deal with cryptocurrencies, and the legality of digital currency is a very common issue. The administration has accused Bitcoin of becoming a weapon of criminal activities because of its anonymity. This scenario, nevertheless, is highly dynamic, with numerous nations introducing new rules governing Bitcoin and altcoins. Some are ecstatic, while others are apprehensive. For example, although the European Union (EU) has not yet issued any official regulatory decision, in Japan, Bitcoin is already regarded as a legal payment method.
Given Bitcoin’s growing fame and global trust, financial service providers should take a proactive approach and ensure that the services provided are legal and compliant with the standards of EU and international anti-money laundering laws and that all funds are processed through regulated EU financial institutions.
Deciphering Bitcoin: Ponzi or Pyramid?
The flow of funds in the Bitcoin trading market is similar to that of the stock market, where new investors buy investments (bitcoins or stocks) from unspecified old investors, and neither new nor old investors can ensure profitability.
The definition of a “Ponzi scheme” is the act of absorbing funds using the money of the later “investor” to pay back to the previous “investor” as a return.
The definition of “MLM” is the act of attracting heads, and absorbing and distributing funds through specific online and offline relationships.
In the Bitcoin/stock market, the elderly have no advantage over the newcomers, and they must rely on their ability to judge the rise and fall to make a profit; while in the Ponzi scheme/MLM, the elderly have a mandatory advantage over the newcomers, and the elderly are forced to obtain funds from the newcomers. Therefore, although the Bitcoin/stock market is the same as the Ponzi scheme/ML scheme, both rely on funds driven by latecomers. However, the Bitcoin market and the stock market belong to the same category and are not a Ponzi scheme or pyramid scheme. Many people confuse the three completely different concepts of “bubble”, “pyramid scheme”, and “Ponzi scheme.”
The Difference between Certain MLM Virtual Currencies and Bitcoin
However, it should be noted that there are currently a large number of virtual currencies issued by fraudulent companies on the internet, which claim to be imitations and improvers of Bitcoin, but they are pyramid schemes or Ponzi schemes (such as Jumbo Coins, OneCoin, and Morgan Coins). Etc.), or although it is not a pure scam, it is highly controlled by the dealer (such as shark coins, husk coins, etc.).
The biggest difference between these scam coins and Bitcoin is that Bitcoin does not belong to any person or organization. It is an uncontrolled and decentralized currency. These scam coins have a clear issuer and are fully controlled by the issuer. Although liar coins are also called “coins”, they are completely different from Bitcoin. Unlike the open-code Bitcoin, most scam coins are not open-coded or even have no code. It is just a number on the website, and the issuer can change as much as it wants.
Is Bitcoin a Speculative Bubble?
It was typical to hear individuals refer to Bitcoin’s price as a speculative bubble throughout its multiple parabolic surges. In addition, many economists have linked Bitcoin to previous times, such as the Tulip Mania or the dot-com bubble.
Bitcoin’s price is determined by free-market speculation due to its unique characteristics as a decentralized digital commodity. So, although numerous variables influence the Bitcoin price, they all impact market supply and demand. And, since Bitcoin is rare and issued on a tight timetable, it’s expected that long-term demand would outstrip supply.
Does Encryption Protect Bitcoin?
No. Bitcoin’s blockchain does not employ encryption, contrary to popular belief. To verify that transactions are genuine, every peer on the network must be able to view them. Instead, hash functions, as well as user authentication, are utilized. While other digital signature algorithms make use of encryption, Bitcoin does not.
Several applications and cryptocurrency accounts, on the other hand, utilize encrypted communications instead of IDs to protect users’ digital wallets. On the other hand, these security approaches have little to do with the network; instead, they’re found in various smart contracts platforms.
CHAPTER 4 – BITCOIN SCALABILITY
What does “Scalability” Imply?
The capability of a platform to scale up in line with increased demand is referred to as scalability. If a web page volume is increasing, for instance, one could scale it by introducing more servers. On the other hand, executing more demanding apps on the system will require to upgrade its features.
The term relates to how easily a cryptocurrency may be updated to accommodate more significant transactions more significant in the situation of cryptocurrency.
Bitcoin’s Scalability Issues
Bitcoin’s scalability has been a challenge as the currency has grown in popularity recently. In other words, this scalability limits the speed at which the network can process Bitcoin transactions.
The reason is that the block is limited in size and frequency. Let’s take an example to illustrate. Suppose a seller wants to complete a payment today. The deal will be packed together into a new block when it has been transmitted. Usually, the time for a valid new block to be generated is approximately It is about 6 to 10 minutes, and this time is the pending time to complete the payment.
Compared with the current debit card or credit card payment form, this speed is much slower. The Visa credit card verification application can process 2,500 operations per second on average, with a maximum frequency of 55,000.
If Bitcoin is to keep up with the mainstream and have a real chance to compete with the more mature forms of payment in the modern world, then the network will have to solve the scalability problem, which is why people often discuss the need to update the Bitcoin infrastructure.
What is Bitcoin’s Need for Scaling?
Bitcoin must be speedy to work in day-to-day transactions. Regrettably, it presently has an insufficient capacity, meaning that each block can only process a few transactions.
Miners get transaction fees as part of the block reward attached to transactions by users to encourage miners to add them to the blockchain.
Is There a Limit to How Many Transactions Bitcoin Can Manage?
Bitcoin must restrict the size of its blocks since a data center does not administer it so that a single party can update at a whim. It is possible to implement a new block size that supports 10,000 transactions per second. The platform’s flexibility, on the other hand, would be jeopardized. Remember that every 20 minutes or so, full nodes will load new data. They will most likely go offline if it gets too difficult for them to do so.
Bitcoin supporters feel that successful scalability must be done in various methods if the protocol is utilized for payments.
How Does the Lightning Network Function, and What Does Is It?
The Lightning Network has already been proposed as a scalability option for Bitcoin and is always regarded as a layer two solution since it moves operations farther out from the database. Rather than documenting all activities on the main layer, they are handled by a protocol built on its site.
Users may transmit money almost immediately and for free via the Lightning Network. There are no throughput restrictions (provided users can send and receive). Two participants locked away some of their money in a specific address to utilize the Bitcoin Lightning Network. The address has a one-of-a-kind feature: it will only release bitcoins if both sides agree.
The parties then preserve a separate ledger where they may reallocate balances without informing the main chain. When they’re finished, they broadcast a transaction to the blockchain. Their balances are then updated as a result of the protocol. It’s also worth noting that they don’t have to trust one another. If someone attempts to cheat, the protocol will catch and punish them.
A payment channel like this needs the user to make two on-chain transactions: one to fund their address and another to disburse the coins later. In the interim, tens of thousands of transactions may be done. The technique might become a vital component for extensive blockchain systems with future development and optimization.