What is bitkoin: simple and clear explanation

What is биткоин: simple and clear explanation

For certain you heard about биткоинах. But if is not present, we will provide to you simple and as a whole the true description of how this currency works, including examples from real life. Let’s lower technical characteristics — them too much, and to find them it is possible, for example, in "Wikipedia". Below you will find only an explanation of that such биткоин, «for teapots».

For the last some months digital currency of Bitcoin (биткоин, BTC) involved a lot of attention. Together with it misunderstanding and confusion concerning the nature and a currency role came. The most important reason is covered that people do not understand how works биткоин because people in principle do not understand how the currency works. Philosophical and economic concepts which underlie functioning of "candy wrappers" which we so love, instead of any watermarks and stripes, lead up a blind alley. Ignorance or «you know less — better you sleep» — the reasons can be the most different.

Stones of Rai

What is биткоин: simple and clear explanation

In the western part of the Pacific Ocean there is an island under the name of Yap. During several hundred years radical yapetets used a unique form of currency — Rai, or stone money. Stones, to several meters in a diameter which some thousand kgs weighed, were extracted on the island of Palau in hundred kilometers from Rai, cut out in the form of a disk and transported on a canoe. Small were used as a coin, and big islands were stored in a visible place and lay there quietly.

Stones of Rai did not carry out any function, except the monetary. They had no decorative value, they did not bring industrial advantage, to use them somehow still it was impossible.

When the owner of a large stone of Rai wished to exchange it, he simply declared to community that the property passes to the new owner, and it was recognized by all; physically the stone could move never. As in stones traded there-here, each stone collected a long chain of the operations recognized as society and stored in collective memory of islanders. Transaction was certified by society and there were no disputes concerning possession of a property. Some stones cost more than the others owing to the history or reputation of last owners.

There is one case which has been written down in the mental annals stories of the island when the big stone of Rai was wasted in the sea during transportation from a pit. The crew returned, both everyone described the size and quality of a stone. It was decided that there is no reason on which the stone could not be entered into economy. What difference, in a pocket it or at an ocean floor? And the main thing — the general arrangement. And lying on a seabed, the stone also was exchanged and transferred as any other.

Despite the strange characteristics, stones of Rai out of any doubts were currency. Yapettsa did not think at all that someone uses something else, except a stone of Rai, in the economy. The price was result of the agreement between associates and did not depend on any external conditions or guarantees.

Real

At the end of the 20th century Brazil had problems with inflation. On an extent more than ten years, beginning approximately since 1980, the hyperinflation, sometimes more than one thousand percent a year, destroyed the Brazilian currency — a cruzeiro. At such rate of inflation of the price considerably grew every day. Owners of shops had to expose the new prices for the goods every morning, and by the evening they again changed. Long-term economic planning became impossible, and such conditions accompanied sufferings and excitements in the people.

In 1994 the Brazilian government accepted a number of monetary and fiscal changes in policy with a view of fight against inflation. This cascade of changes collectively called Plano Real — a realistic plan. The orientation on violation of inertia of inflation was one of aspects of Plano Real. As people expected a rise in prices, they counted on the high prices in the future and raised the prices today, twisting inflation in a dreadful loop.

The government created imagined virtual currency which called «unit of real cost» (Unit of Real Value), and exposed tax collecting and a salary in ERS. This currency was adhered to dollar cost, rather stable currency. The exchange rate between a cruzeiro and ERS floated freely, and every day the cruzeiro price concerning ERS became ever less. There were no banknotes or coins therefore all payments were still made in a cruzeiro, but calculations were carried out on the basis of ERS. Owners of shops and other dealers began to appoint the prices from the point of view of new virtual currency. Transactions were carried out in the presence of a cruzeiro, but the buyer and the seller should calculate "real" cost in ERS. After a while people began to count ERS and to convert in a cruzeiro directly at the moment of purchase.

After «unit of real cost» widely extended in Brazil, cruzeiros were abolished, and the Brazilian government printed new currency — real as the physical embodiment of imagined ERS was necessary. The real is stable and to this day.

Bitkoin

Bitkoin — is digital currency. As well as ERS, it has no physical embodiment of type of a coin or a piece of paper. There are counters which you for certain saw as mass media need to designate somehow new currency, but they in itself do not represent биткоины — coupons, as a last resort.

At биткоина not only there is no physical equivalent, but also any digital unit too. There is a public book of transactions — so-called блокчейн — in which all transactions are fixed, but there are no actual things on which the exchange is carried out. When биткоин "changes", in блокчейне the record describing transaction is created, and transaction becomes to known public through the Bitcoin network. As stones of Rai at an ocean floor or ERS, it is not so necessary to change hands. The network recognizes the recipient as the new owner and any more does not allow to send spent биткоины, as own.

In case of stones of Rai, members of a community were a public network. The population was such is that informal designation of a property quite well worked. In a case with биткоинами, each computer working with the software of Bitcoin, makes network knot, and on everyone the copy блокчейна transfers is stored. As well as in a case with Rai, it prevents disputes on a property — all history of all transactions is available to the general viewing therefore fraud is practically excluded. Any attempt to carry out биткоины without the permission is rejected by a network.

One of critical remarks of Bitcoin is that the currency has no value outside of the currency stream. Actually it not absolutely so — биткоины can be used for transmission of messages, transfer of the property right, creation of temporary labels, the signature of contracts and so on. But we will leave this argument while. Actually, it at all problem. Many currencies have no value outside of their use — for stones of Rai it is impossible to buy everything on light, and ERS too was an imagination fruit, but both currencies successfully took place. As value is not quality of object, and describes the human relation to these objects, or a condition of human mind concerning these objects, биткоин rather, as well as any other thing, can be estimated, though it cannot have no industrial, decorative or any other practical application.

As well as Rai, биткоин does not depend on any central body or the bank supervising currency. The software is open, and the network functions by p2p (peer-to-peer) principle, as a torrent. No changes can be carried out without a society consent. Creation биткоинов is mathematically limited to total 21 million. Unlike a cruzeiro, it is impossible to take and print so simply new биткоины, having added some zero. Nobody can define speed from which it is created биткоин — the mathematical algorithm makes биткоины with final and predictable speed. Any attempt will change it the member of a network is immediately rejected by a network. Imagine, if the swindler on the island Yap tried to push a counterfeit stone of Rai.

As at биткоина there is the physical unit, any requirements for storage, no transportation or service, the expenses connected with its use, the lowest. Million dollars in a bitkoin-equivalent can be transferred for kopeks. It on some orders is lower, than at any other payment network. After stones of Rai safely took place on island places, there were no practical costs of their contents. Their huge weight prevented theft, and possibility to transfer them in society, without moving, reduced expenses on their contents and service to zero. In биткоин the cryptography does not allow to steal currency in principle, without speaking about physical weight. Therefore биткоины sometimes call kriptovalyuty. Without appropriate cryptographic keys nobody can get access to биткоинам another.

Other criticism биткоин consists that anybody actually does not know who supervises them. It is the truth, but ignorance of it means only that nobody supervises биткоины. The network develops spontaneously as new members join and the old leave. Thus, the network works as other difficult networks of our world — the Internet, a brain or society in itself. There is no master of the Internet who pulls threads. A network — a product of billions the users creating knots. Bitkoin works similarly, and the network very quickly grows. Figures constantly change, and at the beginning of 2013 computing power of the Bitcoin network surpassed computing power of 500 most powerful supercomputers of together taken. Can present, as attempts to supervise this network in one face silly would look.

Bitkoina share on small fractions — some tenth signs therefore it is not obligatory to use биткоин entirely. The majority of transactions are small — dollar or less. Bitkoina cheerfully to use, transactions pass quickly and as a whole this new and interesting. Theoretically биткоин or its successful analog can bring us into the world of the free currencies which have not been held down by the state control, usurers or orders, and quietly carrying out the direct function in the market without coercion or violence in a voluntary consent of members of the network participating in an exchange.