Bitcoin is a digital coin. It was the first decentralized digital currency and introduced by a Japanese software developer, Satoshi Nakamoto in the year 2009. As the new payment mechanism it has some characteristics that slightly different with the normal coin. Bitcoin operate with no central authority or bank as middle man because they are digital, so any transaction does not happen in their business. It’s also means that no transaction fees to the user but you need to pay for processing fees. Although using a bitcoin is free but you will be voluntary fees will be charged to you to booster your transaction processing.
As the new kind of money, bitcoin can be transfer via the net or from your computer, tablet, and smartphone to anyone and …show more content…
Web wallets likes coinbase, coinjar, coinpunk and coinkite are the simplest one and more convenient to use but it insecure than software wallet. Secondly, software wallet can be installed and run in your computer. It’s more secure because user has more power to control it and does not fully depend to 3rd party service. BitcoinQT is the original Satoshi’s wallet and Armory is most suggested since it has full developed features. Multibit is an easy going wallet because it does no need a full download of the block chain. Coinjar and coinpunk can also be available in the Android and iphone as both of them are mobile phone wallet. Hardware wallet is the most protective wallet because they don’t expose your private keys to the network. Some examples for hardware wallet are Trezor and Bitsafe.
Secondly, what make bitcoin works is transaction between bitcoin wallet and block chain. Bitcoin wallets keep a secret piece of data called private key. Private key will sign transaction from the owner’s wallet because once it had issued, the signature will prevent any transaction from being changed. All transaction broadcast between user are usually begin to be confirmed by the mining process. Mining process is a bitcoin networkers secured by individual called miners. Miners are rewarded newly generated bitcoin from verify transactions. After transaction are verify they recorded in transparent …show more content…
All confirmed transaction will be post to the block chain. Using this method, bitcoin wallet can compute their spendable balance. The reliability and sequential order of the block chain are enforced by the cryptography. These systems prevent previous blocks from being modified because doing so would invalidate all following blocks.
So why bitcoin cannot be fundamental as a currency ? The government of united stated will now subject owners to capital gains taxes so what they gain on buying or selling a bitcoin they must pay taxes on. So bitcoin can no longer function as a digital currency. Fungibility of bitcoin will destroy if we tax it as property ad can no longer exchange for another ( Levitin, 2014 ). Bitcoin intended to function as a kind of digital currency, meaning it had to work as a unit of account and a store of value.
As a unit of account, bitcoin must have one standard numerical value to measure settle debts and profits. The standard must be divisible and verifiable. Divisible means smaller units of bitcoin could be traded. Verifiable means bitcoin must be same as other bitcoin because is a basis of cryptosecurity. As a store of value, bitcoin’s price probably needs to be stable. In late 2013 many claimed that price of bitcoin quickly increase kept it up from operating as a dependable store of value, but there were no technical or regulatory reasons