Bitcoin (BC) or “digital coin” is a digital currency , at the same time the name of the decentralized booking system that can be used worldwide as well as the simplifying designation of a cryptographically legitimated allocation of labor or computational effort. Remittances are handled by an aggregation of computers over the Internet using a special peer-to-peer application, so that unlike traditional banking, no central clearinghouse is needed. Proof of ownership of Bitcoin can be stored in a personal digital wallet . The conversion rate of Bitcoin into other means of payment is determined by supply and demand.
The Bitcoin payment system was first described in 2008 in a document published under the pseudonym Satoshi Nakamoto . The following year, an open-source reference software was released. The Bitcoin network is based on a decentralized database (the blockchain ) managed by the subscribers together with the help of Bitcoin software , in which all transactions are recorded. The only condition for participation is the operation of a Bitcoin client; Alternatively one of the online services can be used (eg for mobile devices). As a result, the Bitcoin system is not geographically restricted – Internet access is sufficient – and can be used across borders.
Using cryptographic techniques ensures that transactions with bitcoins are made only by the owner and the monetary units can not be issued multiple times. Therefore, Bitcoin is also called a cryptocurrency , although currency is usually the currency issued by states. The term Kryptogeld is also used in German-language media.
The concept of Bitcoin was proposed in 2008 in a white paper by Satoshi Nakamoto on a mailing list about cryptography . So far it was not known whether Satoshi Nakamoto is the name of a real existing person , a pseudonym or a collective pseudonym for a group of people. Bitcoin is based on the idea of a cryptographic currency, described by Wei Dai as b-money in 1998 and Nick bitcoin as bit gold .
“The core problem of conventional currencies is the level of trust needed to make them work. The central bank must be trusted not to devalue the currency, but the history of fiat money is full of betrayal of that trust. Banks must be trusted to keep our money and transfer it electronically, but they lend it in waves of credit bubbles with a small fraction of coverage. We must entrust our privacy to the banks, trusting that they will not give identity thieves the opportunity to clear our accounts. Their massive additional costs make micro payments impossible.
A generation earlier, users had time-sharing. Computer systems a similar problem. Before the advent of strong encryption, users had to rely on password protection for their data and trust the system administrator to keep their information confidential. This privacy could be removed at any time if the administrator concluded that it weighed less than others, or at the direction of its supervisor. But then strong encryption became available to the masses of users, and trust was no longer needed. Data could be secured in a way that made third-party access – for whatever reason, no matter how good a pardon, whatever else – made impossible.
It’s time we did the same thing with money. With an electronic currency based on cryptographic proof that does not require trust in middlemen, money is safe and can be easily transferred. ”
Satoshi Nakamoto (BC creator)
The Bitcoin network was created on January 3, 2009 with the creation of the first 50 Bitcoin and the “Block 0”, the so-called Genesis block of his “Chain”. The following message was encoded in its coin base:
“The Times 03 / Jan / 2009 Chancellor on brink of second bailout for banks.”
This alludes to the newspaper article of the same name in the British newspaper The Times during the banking and financial crisis from 2007 onward. A few days later, under the pseudonym “Satoshi Nakamoto” the first version of the Bitcoin reference software Bitcoin Core published.
Future of BitCoin’s Security
While almost all transactions are publicly stored in the blockchain , ownership of bitcoins is evidenced by private keys that are only accessible to the owner. If the keys are lost, the associated bitcoins are lost to both the owner and the entire network. The money supply, limited to 21 million bitcoins, is reduced by such amounts, but in the case of a key recovery, these remain valid without restriction.
Spying on the keys also gives an attacker access to the credit. It is not excluded that such bitcoins colloquially referred to as “stolen” may be assigned in later transactions, but these are considered fungible (analogous to money) and identification of “thieves” is similar to cash only possible in exceptional cases.
