What does Bitcoin support
Speaking about cryptocurrency, in particular about Bitcoin, many people understand that it is valuable. Well, no one will throw away a fortune for something that has no value. To date, according to Coinmarketrate.com, the cost of the king of cryptocurrencies is 46,420 US dollars.
But, understanding the value of the MTC, few people will be able to clearly explain how this asset is supported. Let’s clarify this issue.
But first, let’s figure out what software or support is.
What is a secured currency?
A secured currency is a form of assets that comes with a guarantee that they can always be exchanged for a predetermined amount of another asset. For example, a currency backed by gold may have a guarantee that its 100 units can be exchanged for an ounce of gold.
The most common assets for collateral are gold and silver, but the currency can be backed by anything. Since 1879, the US dollar has been backed by gold, mainly because of its interchangeability and rarity, important characteristics of money.
The currency can also be backed by another currency. This is called a currency binding. By supporting it, you guarantee that it will always be worth no less than it can be exchanged. However, secured assets can easily lose credibility if citizens lose faith in the government’s ability to maintain a fixed exchange rate. In this case, there are black money exchange markets that allow you to form a real exchange rate.
Why are currencies supported?
Currencies are supported to ensure that they retain their value. This is a necessary tool for the work of the government, but many governments have faced the instability of their monetary instruments. This makes it difficult for citizens to use the currency effectively and harms economic growth.
The government can print its currency indefinitely, but the more it prints, the less scarce it becomes, which leads to inflation. A secured currency can be protected from inflation, but the government will need to purchase more supporting assets to maintain reliable support.
To combat currency instability, the government can back it up with another asset to convince citizens that it will retain its value. However, this method will be successful only if citizens trust the promise of support.
If holders begin to doubt that the government has enough support funds to guarantee the promised exchange rate, then the currency can quickly become worthless, as individuals will try to exchange it for a limited underlying asset.
What does Bitcoin support
Bitcoin is not supported by any assets. This should be intuitive, because it is not controlled by any person or organization. Consequently, no one can make this promise, and they will gain nothing by taking on the huge responsibility associated with providing support.
The lack of support does not mean that Bitcoin has no value. Most of the currencies used in the global economy do not have support. By definition, fiat is a currency without support, and this is what every major economy in the world uses to conduct daily transactions.
However, a state-issued asset usually gets its stability from the central bank’s control over the amount of money issued, as well as from the faith that its citizens and other countries attach to the stability of the government. When this belief is undermined, fiat can quickly become worthless, as citizens and foreign countries will try to exchange it for more stable assets.
For a better comparison with Bitcoin, we should look at assets that are not issued by a central authority. Precious metals, which get their value due to scarcity, and not use in construction and engineering, are similar to BTC in this sense.
An ounce of gold does not give you the right to exchange it for another valuable asset. On the contrary, gold is valuable because gold itself is valuable. People usually don’t worry about their gold becoming worthless, because the market has established that gold has value for thousands of years. Similarly, the value of Bitcoin depends on demand, and does not require any support to maintain this value.
Another reason why decentralized markets have been able to gain popularity in recent decades is that they allow people to interact directly with each other. Without intermediaries, bidding can go smoothly and cheaper. Moreover, communication will be at its peak, since each party will not have to rely on a centrally controlled service. And thanks to the direct interaction of people, trust and transparency during transactions increases.
Higher cost and profiling
Another thing to pay attention to is the cost of a centralized market. Most online stores are too centralized, and although their channels differ, they pay a fairly high amount. These product fees can reach up to 10%, while sellers can first bear these costs, they then inflate the price of their product, which shifts the costs to buyers.
Online stores also study the behavior of their customers in order to collect data about their shopping and shopping habits. They can also force buyers to comply with the laws of their jurisdiction. All these reasons contribute to the fact that people are more welcoming of a decentralized market.
Blockchain Expands the possibilities of Bitcoin
Blockchain technology plays an important role in the work of cryptocurrency. All the advantages that the cryptocurrency provides are related to the underlying technology that underlies it.
Blockchain is a publicly available computerized record of exchanges, in which data is recorded that makes it difficult to hack or change. The innovation allows people to interact with each other in a secure way without a delegate, such as an administration, a bank or another outsider.
The developed summary of records, called blocks, is related to the use of cryptography. Each exchange is freely checked by distributed computer nodes, calculated over time and added to the developing information chain. After recording, the information cannot be changed.
Advocating for the development of the use of Bitcoin, Ethereum and other digital currencies, blockchain innovations have promising applications for legal agreements, real estate transactions, medical records and everything that is required in other industries to approve and register the course of actions or exchanges.
Using the Bitcoin platform, here’s how the blockchain, otherwise called innovation in the field of record distribution, works:
- The purchase and supply of Bitcoins are entered and sent to an organization of computers known as hubs.
This organization of thousands of nodes around the planet strives to solve these equations, and whoever is the first in this race to add a new block to the chain receives in return the extracted BTC as a reward for their work. These prizes are paid for by network costs, which are paid to the buyer and the dealer. The costs may increase or decrease depending on the volume of exchanges. This whole process is called Bitcoin mining.
After the purchase is cryptographically confirmed, the transaction is added to the distributed registry. After that, most organizations must confirm the transaction during an interaction known as a”work check”.
The idea of innovations in the field of blockchains first appeared quite a long time ago, starting in 1982, in an exhibition dedicated to “the plan of an appropriate PC structure that can be created, maintained and trusted by ordinary communities”. In 2008, the BTC became the first form of digital money of its kind.
Pros and cons of this
- Decentralization is the main advantage of cryptocurrencies.
- Transparency in addition to secrecy for all transactions that are processed between participants.
- Accuracy and security for investors are also advantages of the blockchain.
- Blockchain applications have gone beyond digital assets.
- Openings for the low-income.
- Online scams, and sometimes fake ICOs, which are scams.
- Digital forms of money with blockchain are extremely unstable, and therefore people resist investing in them. The volatility in the cryptocurrency market has always caused concern.
- The environmental consequences are also of concern, as energy consumption is slightly higher.
- The Bitcoin blockchain is moderate because the confirmation time is much slower compared to other cryptocurrencies.
Summing up, we can safely say that Bitcoin is an asset that does not need support with real values. He needs faith in him.
Also, we know that the revolutionary technology of Bitcoin is the blockchain. Based on the above, it becomes clear why the VTS and blockchain are so popular, and why they are the future.