Bitcoin is a payment system, not just electronic money

First, Bitcoin is not really a so-called “currency” but an “electronic money payment system.” Some people say differently, but this is also the fact that was written in the title and preface of Satoshi Nakamoto, the inventor of Bitcoin.

Bitcoin is a system that records data about how much is issued to whom and how much it is paid to, rather than someone passing something physical. However, not only the name, but also the unit itself is called Bitcoin (often abbreviated as BTC), which makes the story complicated.

Bitcoin is often referred to as a “cryptocurrency,” but it’s just that for convenience because it’s actually used like a currency. And even among great scholars, there is still a debate about whether bitcoin is a currency (edit note: in Japan, the so-called virtual currency law was enforced in April 2017, but it is not a legal currency, defined as one of the means of payment).

In fact, the electronic money you use in Japan is one type of the same payment system. In that case, when you charge, the amount will be recorded as a balance somewhere by cash equivalent exchange, and if you use it at a convenience store, it will be recorded as the balance being transferred to the convenience store.

Again, there is a Bitcoin coin called “Bitcoin”, and no one is in control of it. First, remember that Bitcoin is a payment system, not money.

On the other hand, with regard to general electronic money, the service operator purchases itself as a fee business. In the convenience store example above, the electronic money paid by the customer is bought back after deducting the commission. It is different from the basic idea.

Bitcoin is open

The bitcoin loophole is actually software. And, it is a mechanism called “open source”, and the contents of the program (source code) is open to the public as it is. In short, anyone can view the contents and install it for free.

Bitcoin is payment system software that can be installed by anyone (its installation will be discussed later).

The fact that the contents are fully visible means that engineers around the world who can read (write) programs can freely scrutinize whether the contents are fraudulent.

So who makes the program? Speaking of which, engineers are volunteers all over the world. Moreover, it is no exaggeration to say that the world’s top-level human resources are gathered. From a practical perspective, it is also necessary to develop rules and expand peripheral services.

In the early days of the banking system, there was a fraud in which system developers “cut down” all the calculations and put all the fractions in their accounts. It means that such fraud is impossible with Bitcoin.

In the case of a banking system, the contractor who undertakes the development thoroughly inspects the defects and crushes them thoroughly so that it does not interfere with the operation. When it comes to Bitcoin, the amazing engineers around the world crush it.

Have you ever heard that the electronic money or banking system you use is “public” to the contents? That is absolutely impossible for security reasons.

Since all Bitcoin is open to the public, it can be inspected and audited by anyone in the world, and it is a “credible” payment system that can be said that there is no fraud in the mechanism itself.

This is a basic technology that supports the Internet, such as operating systems, servers, and security-related software, and is not unrelated to the success of open source software. You can trust it because it is exposed to the unspecified number of people and constantly revised.

Bitcoin has been issued every 10 minutes every day since it was released in 2009, but the issue volume has been halved about every 4 years, and it has been decided from the beginning that the total amount will be 21 million Bitcoins.

When each computer receives a request, it compares the request to predetermined technical and business conditions and rules for new data that can be added. When the transaction is verified, it reports it to the other computers in the chain.

About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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