What are the functions of Bitcoin (What is the purpose of Bitcoin)?

08/17/2023 22:08 • Daily Digest • 66 views

What are the functions of Bitcoin? What are the characteristics of Bitcoin? In the world of cryptocurrency, it can be used to create various types of digital assets. For example, gold is a commodity, a medium of exchange, an electronic cash, and another means of storing value, etc. Bitcoin also has its own mechanisms. When people purchase a mining machine, they need to pay a certain amount of electricity fee (the higher the price, the lower the usage cost), and if they want to draw electricity from the power grid, it must be transmitted to the corresponding wallet through the Internet for transactions. But for many investors, it is difficult to understand this concept, as traditional banks in the financial system operate based on credit endorsements. Therefore, ordinary users may not be able to participate in it.

In addition, some people say that Bitcoin has great potential as a tool for hedging inflation, because it is not only an investment form for daily consumption but also a significant component with tremendous influence. For instance, countries like El Salvador are considering accepting Bitcoin as a form of payment, etc.

What is the purpose of Bitcoin?

Bitcoin, as a new form of cryptocurrency, plays an important role in the financial system. It is considered to be one of the global reserve assets, along with the US dollar, euro, and yen, among others.

However, if the research on blockchain technology over the past decade indicates significant progress in its applications, what will happen in the next five years? This article will explore these questions and provide answers. What is digital gold? According to a recent report released by the Bank for International Settlements (BIS), as of May 1, 2020, 60% of the value of one billion US dollars in legal tender is backed by Bitcoin, and the other 20% comes from traditional assets such as government bonds or stocks. Despite many claims that this effort could lead to the devaluation or depreciation of the US dollar as central banks issue their own currencies rather than US sovereign debt, it does not necessarily mean that Bitcoin will cease to exist because Bitcoin can provide a more efficient price discovery solution while still resisting hyperinflation. Why is there a need for cryptocurrency? First, we need to understand what Bitcoin is and why it is a place to store wealth. When you consider if Bitcoin is a secure investment tool, what comes to mind? Or what can you do with it? Of course, one of the factors may be its monetary properties, such as scarcity and decentralization, like its network effects. Therefore, if you own a Bitcoin, you don’t need to spend it.

Secondly, Bitcoin has the unique feature of being “verifiable.” It enables traders to receive funds for payment by sending messages. Bitcoin’s anonymity makes the trust of Bitcoin holders more transparent and easily achievable, and there are no intermediaries involved. To address this issue, users have to receive payments from their own account balance before completing the transaction.

Furthermore, Bitcoin’s security helps protect their privacy: they do not rely on third-party institutions or entities but are secured directly by their own controlled wallets. Additionally, they can utilize cryptographic principles to identify the internal structure of Bitcoin and its related information. While Bitcoin is not the sole form of currency aimed at specific groups, in most cases, it can indeed be used for identity verification and other activities, even being considered as a highly secure electronic cash system.

Lastly, as the world becomes increasingly digital, more countries are adopting cryptocurrency. Apart from some countries, the majority of regions around the world benefit from the use of cryptocurrency. However, there haven’t been large companies like China that accept cryptocurrency yet.

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What are the functions of Bitcoin (What is the purpose of Bitcoin)?

What is the purpose of Bitcoin?

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