Bitcoin is famous for being a peer-to-peer currency that’s said to replace fiat currency. It’s a digital cryptocurrency that has its many uses. You can use it to pay online purchases or services, or you can also trade or invest it in a trading platform.
That’s why a lot of countries have accepted bitcoin, whether for personal or business purposes. Although its popularity hasn’t reached all countries, yet, more governments are now seeing its pros. Thus, a lot of rumors are circulating that it can change the traditional financial system.
Here are some reasons why Bitcoin is globally accepted:
1. Bitcoin Protocol
Many people believe in the Bitcoin protocol because the platform can help in any transaction without the need for third parties. Also, when you’ve learned its protocol, you may even end up creating a new financial instrument that’s popular nowadays.
Because of its protocol, high-valued people accept it to represent physical property, future contracts, shares of stocks and the like as long as they’re attached to bitcoin. The protocol can be used to replace loyalty cards that are easily lost and forged.
Thus, you should be familiar with the following before delving further about its protocol:
- CHF or Cryptographic hash function – a one-way function used in cryptography, which means that you cannot invert an action already made. It’s responsible for creating a fixed size of a bit string from a mapped data of arbitrary sizes through a mathematical algorithm.
- Digital Signature – to know if a digital document or message is authentic, a mathematical scheme (digital signature) is used to verify it.
- Public Key Cryptography – also produces non-invertible actions through a cryptographic system. The keys paired together are private keys and public keys. Only the owner can access the private keys, while the general public can see the public keys.
Now, here are the things to help you understand how the Bitcoin protocol works:
- Bitcoin Transaction – the start of sending or spending Bitcoins involves understanding important terms, the Output, Amount, Input, and ID.
The ID is a double-has transaction data that is unique. Transferring of bitcoin sources are identified through the bitcoin addresses or the input. The number of bitcoins you intend to transfer is called amount. Lastly, output refers to the bitcoin address of the receiver. Since bitcoin is transferred from one to another, the input is from the previous outputs creating a chain of ownership.
- Transaction Validation – it involves verifying and checking the availability, duplicity, and authenticity of the digital cash. It uses the keys for verification purposes, then the transactions are listed into the bitcoin system. The transactions are now called blocks forming the blockchain. Once confirmed, the transaction is not reversible.
- Bitcoin Protocol Summary – The network can see a new transaction. The block receives new transactions collected by each node. The validation of the new transaction is through the nodes’ Proof of Work. When the block is solved, it’s now broadcast to the network. Then the nodes accept the block, which will become a reference for creating of a new transaction.
Since the internet can help a lot of people to solve their problems, committing crimes involving money are also becoming easier. A lot of people can now hack or access someone else’s credit card information.
That’s why a lot of companies, big or small, are now using bitcoin as payments because of the security its system offers.
Here are the reasons why Bitcoin is considered safe:
- Decentralized system – all bitcoin transactions are tracked by thousands of nodes over bitcoin servers all over the world. That means that if something happens to one of the nodes or servers, the other nodes can still see it.
Also, hackers would have difficulty in manipulating the system since there are thousands of nodes that can prevent them. Moreover, since no third parties oversee the system, a transaction can never be managed; no central entity is controlling each transaction making it clean and can never tampered. Therefore, no one can manipulate or fake any transaction.
- Public – as mentioned earlier, all transactions are broadcast in the network. Thus, all the people in the network are keeping watch over your wallets. They can only see the public keys but not the private information or details about you, which makes the entire network fully encrypted.
Although the bitcoin wallet addresses are public, the person involved in any transaction remains anonymous. Also, the transparency of all the transactions makes it hard for anyone to manipulate it.
- Wallets and Transaction Process – developers of digital wallets and cryptocurrency exchanges, like Bitcoin Australia, are regularly updating the security measures of their system. It’s to prevent hackers from accessing one’s wallet. For instance, a two-factor identification allows only the owner of the wallet to access it.
Although bitcoin prices are volatile, bitcoin is theoretically considered as less risky as compared to fiat currencies. Because bitcoin is not owned or controlled by any country, its possibility of suffering from a political risk is lesser.
With fiat currencies, its value sometimes relies on the political and economic risks of a country. But for bitcoin, it’s not affected by any country’s situation.
Moreover, here are the reasons why bitcoin is more stable than fiat currencies:
- As payments, bitcoin moves quicker and faster. Within ten minutes, new bitcoins come into existence after intensive math problems are solved.
- It creates freer capital markers. Since no manipulations from any financial system, bitcoin has a system with robust monetary policy and a fixed schedule.
- Bitcoin is decentralized; thus, no bank or government controls it. Unlike fiat currencies that rely on the banks and the government’s promises, bitcoin can remain strong.
Bitcoin is accepted globally because of the transaction costs that it offers. Unlike other financial companies that charge users 2-4% of transactions, bitcoin only charges up to 1%.
Whether you’re involved in a peer-to-peer transaction micro-payments, bitcoin has an economical pricing model. Also, peer-to-peer transactions from owning to creating a small business are made simpler.
Lastly, international transactions benefit most third parties. These are the ones that handle and charge your transactions. But with bitcoin, you can save a lot of third-party fees as it doesn’t involve any third party.
Because people want to have a better financial system that’s both beneficial to themselves and the government, more investors are taking the bitcoin path. With more investors, bitcoin’s popularity arises. Thus, its benefits are more and more known to a lot of people. And when people see that they can benefit from it, they readily accept and use bitcoin. Therefore, bitcoin acceptance is now the trend worldwide.