Understanding Bitcoin (1 of 5)

  1. Bitcoin as transaction medium: what is the difference with other payment system?
  2. Bitcoin as a virtual currency
  3. What’s behind a transaction
  4. Ledger: everything is kept in record
  5. Mining: let the ledger keep running

Bitcoin as transaction medium: what is the difference with other payment system?

Despite the negative words today describing Bitcoin, such as “speculation”, “ponzi scheme”, “money laundering”, the original idea of Bitcoin is for transaction, which is something like how we spend the cash. The very first white paper of Bitcoin is titled with the term “Electronic Cash System”, and we can see what purpose it is at the very beginning.

Anonymity

One unique point is anonymity. There is much difference when using cash (banknotes or coins) versus other payment systems today, and anonymity is a very important one. That is to say, no one can trace the usage history of a banknote or a coin: who has been using this banknote or coin for what purpose and to whom it is passed. Only police may be able to trace the the banknotes in criminal investigation, and this would be a rare case. On the contrary, other payment systems have some ways to keep track transaction history for someone (well, they are eager to do so).

Independency

Here the term “independency” comes with two levels. Bitcoin does not require being bound with any bank accounts or credit cards. As far as I can deposit some money into the wallet, I can use that amount of bitcoin.

Transaction without Boundary

The convenience shop scenario mentioned above shows that, as far as I have the address of recipient, the transaction has no geographic boundary. It is equivalent to money transfer.

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