Bitcoin and cryptocurrencies
A cryptocurrency is a digital asset designed as a medium of exchange. It uses cryptography to secure transactions and control the creation of additional currency units. Cryptocurrencies are digital currencies, a subset of alternative currencies. The most popular cryptocurrency is bitcoin, and since their invention, the various new cryptocurrencies that have been created are often referred to as altcoins, short for bitcoin alternative.
Bitcoin was developed as a peer-to-peer system that can be used for online payments without the need for a trusted central authority. Since its invention in 2008, Bitcoin has evolved into a currency, a technology, an investment vehicle, and a community of users. In fact, it is believed to be the first cryptocurrency, although as mentioned earlier, similar systems existed before. Because the Bitcoin system works without a single administrator (like PayPal?
) or a central repository, the US Treasury Department categorized Bitcoin as a decentralized virtual currency. In fact, the first decentralized digital currency would be a more correct term than the first cryptocurrency.
Since all transactions are digital and take place directly between users, with no intermediaries, there must be a way to ensure users are not spending more bitcoins than they own. Therefore, all transactions are verified by network nodes and recorded in a publicly distributed ledger called the blockchain.
While everyone has at least heard of Bitcoin and other cryptocurrencies, few have a thorough knowledge of how they work. In the remainder of this article, we will present you with the most important advantages and disadvantages that you should consider before taking advantage of the possibilities of Bitcoin.