What is bitcoin?
The Bitcoin is a virtual digital currency, it is secured by a cryptographic protocol and is not controlled by any central authority. Created in 2009 by a person under the pseudonym Satoshi Nakamoto, it was initially conceived as a payment method that would not be subject to government supervision, without transaction fees or delayed transfer, unlike traditional fiat money.
In 2010, a bitcoin was quoted at around 0.003 cents. By October 2017, his course had exceeded $ 4200. Its value remains volatile, however, with many intraday variations. During this period, hundreds of crypto-currencies appeared, each with unique characteristics and applications. Few of them have significant value. Bitcoin, however, has some rivals, such as ether , cash bitcoin and to a lesser extent litecoin, ripple and dash. You can get more information on Bitcoin Cash ABC website.
Currency or raw material?
Bitcoin was originally designed as a payment method, and in some cases works as such. But it is currently far too volatile and its use is not widespread enough to become a real alternative to fiat currencies: traders should adjust their prices every day to keep up with price changes. This means that bitcoin is mainly used as an investment, more like gold and other precious metals than traditional currencies. Like commodities, its value is not influenced by the performance of a particular economy, and it is not affected by monetary policies. Please note that while bitcoin is not affected by many of the factors that influence traditional currencies, there are a number of factors that it faces.
How does bitcoin work?
The bitcoin needs two underlying mechanisms to work: blockchain and mining. The blockchain or blockchain is a distributed database that contains all bitcoin transactions made to date. These transactions are grouped into “blocks” that are cryptographically secured during the mining phase and linked together. You can get more information on Bitcoin Cash ABC website.
The chain of blocks is accessible to all and at any time. It can only be changed with the agreement of the majority of the network and their computing power. This means that it is virtually impossible to modify it retroactively, has no weak points, and is not vulnerable to human error.
The mining is the process by which the blocks are secured, the result of which new crypto-currency units are outstanding. These units are called “rewards”. For bitcoin, the reward currently stands at 12.5 bitcoins, but it halves every four years or so.
Miners are responsible for verifying transactions and securing them cryptographically by solving complex algorithms. Their difficulty can be adjusted to keep the block processing time approximately constant. Miners exercise significant control over bitcoin because of their crucial role in the network, especially since mining is now a very profitable activity.
Once these units are in circulation, they can be freely traded on a stock exchange and backed up in a virtual wallet. When you trade bitcoins with IG, you never own the security, so you do not need to own a portfolio or a securities account.
What is a bitcoin split (or bitcoin fork)?
A split is the process by which a blockchain – or transaction log – splits into two. The miners must then decide which official version to use, the other version will then be discarded.
A split occurs when the software used by the mining community is no longer aligned, allowing the blockchain to undergo essential software updates. There are two types forks.
The soft forks : The new blockchain is in charge of validating all transactions (blocks), but the previous blockchain remains compatible and can record these transactions. Please note that this only works in one way: the new blockchain will not be compatible with the mined blocks via the previous blockchain.
The hard forks : The new blockchain is now in charge of validating all transactions, but the previous blockchain is no longer compatible with the new blocks and can not validate. This means that all users of the old program must update their software in order to access the new blockchain.
In general, a split is resolved with very little or no disturbance. But it has happened that disagreements on the evolution and operation of a cryptocurrency are insurmountable. For example, this was the case for cash bitcoin, which appeared during a bitcoin split that divided the mining community. The result was the creation of two separate cryptocurrencies, bitcoin and cash bitcoin. The two currencies are now completely incompatible, despite a history of transactions in common.