“Bit(e)” Size Summary on Bitcoin
Understanding the Bitcoin White Paper
Bitcoin was created to eliminate the possible breach of trust that can arise when dealing with transactions online. These transactions usually involve a third-party (financial institutions) that can reverse transactions due to fraud such as identity theft or fake cards. This causes a nightmare for businesses to the point that they lose trust, given that they collect more information on customers than is necessary. These businesses also mostly have to create an expense account just for potential losses due to these reversals by the third party especially when dealing with a non-reversible service. Can this way of service ever be completely trustworthy?
Bitcoin is an electronic cash system that uses cryptographic proof instead of trust. This system has the ability to eliminate the above mentioned issues that modern consumers face on a regular basis. This is achieved through peer-to-peer transactions which means that buyers and sellers deal with each other directly and there is no seemingly biased third party with the need to mediate. Most importantly, the transactions are non-reversible and this is a way to avoid the potential fraud that might occur. To further deter this fraud, the coins are not allowed to be double-spent which was initially done using a company but the vision was to be completely direct with no intermediaries. Double-spending of coins was later resolved using a timestamp server, since the information cannot be altered you can check to see if that coin still belongs to the buyer and if not then approval may not be given for them to use that coin again. This information is stored in a ledger later described as the blockchain.
Bitcoin is sometimes seen as simply a cryptocurrency but it is way more than just a currency. Bitcoin is also a blockchain (used as public storage) thanks to the continued work to exclude the middleman and deter fraud. This chain/technology was initiated as a way to prevent double-spending by creating a public distributed storage of all transactions made which is impossible to alter. This chain is created by connecting these timestamps using their hash and reinforcing everything before it ensuring a single history of receipt. This ensures no fraud can occur based on solid proof. Bitcoin as a cryptocurrency/digital asset led the way and revolutionized the way that cryptocurrency is seen and is still a very, if not the most, popular cryptocurrency.
To say it simply, it is similar to cashing a bad cheque from another person but it is your account that is actually penalized and you are charged bank fees. These financial institutions cannot avoid settling disputes and will mostly side with their customers (buyer) most likely issuing refunds which is impractical for the seller. An intermediary creates an unnecessary extra person that makes the water muddier. Bitcoin is a secure system which uses proof-of-work to avoid attacks and ensure no alterations as well as making sure there is no breach of privacy by making the transactions public all the while maintaining anonymity for buyers and sellers. This peer-to-peer electronic cash system was created so sellers and buyers can have more confidence in their exchange, with basic idea of excluding the third party upon which every modern consumer has come to rely upon. These third parties that muddy the water also increases transactions costs and stripes the ability for practicality by not being able to make casual transactions. This was the idea behind becoming direct and creating a public chain of events.
Disclaimer: The views expressed by the author above do not necessarily represent the views of the Ethereum Foundation.
