What Exactly Is Bitcoin And Can Replace Currency To Circulate?

< p > December 5th, the central bank and other a href= "http://www.91se91.com/news/index_c.asp" > five ministries and commissions < /a > announced the prohibition of financial institutions to carry out bitcoin business, but said bitcoin pactions as a kind of Internet commodity trading behavior, ordinary people before their own risk to have the freedom to participate.

This has led to a 35% decline in bitcoin trading in Asia.

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"P", however, bitcoin has won the affirmation on the other side of the ocean. One of the largest institutions in the world, Meilin Merrill, announced that its research scope is officially covered by bitcoin, and compared with the valuation of the special currency, US $1300. Its analyst David Woo believes that "bitcoin can become a major way of payment for e-commerce, and become a strong competitor of traditional currency pactions".

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< p > bitcoin originated in 2008. A domain name bitcoin.org was successfully registered anonymously. In October 31st of the same year, a paper entitled "bitcoin: P2P electronic money system" was published on a website. 10 days later, a project called bitcoin was launched on the open source community sourceforge.net.

No one knows who the creator of this project is.

The developer only left a Satoshi Nakamoto name, and he completely disappeared from the Internet after building the bitcoin system.

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< p > Nakamoto So bases on the concept of open, peer to peer, consensus and direct participation, combines open source software and block cipher working mode in cryptography, develops the operation system of bitcoin issuing, trading and account management on the platform of P2P peer-to-peer network and distributed database.

Its system enables all nodes throughout the peer network to reach a network protocol in accordance with its seed files, so as to ensure fairness, security and reliability in the aspects of currency issuance, management, circulation and so on. It also promises that bitcoin will become "e-cash" similar to e-mail, so as to avoid inflation and avoid forgery without requiring approval and everyone has the right to issue.

After payment is completed, the user loses ownership of the bitcoin.

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< p > users can acquire bitcoins according to the system of Chinese Ben Cong through complex algorithm and large amount of computing resources. As long as they download the open source client and let their computers participate in solving mathematical problems, they will be able to get this kind of virtual cash if they win in the end, and this method is widely referred to as "Mine".

Of course, users can also buy bitcoins through paction agency services such as BitInstagnt and Coinbase.

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According to the analysis of < p > < strong > < a href= > http://www.91se91.com/news/index_f.asp > Wall Street < /a >, bitcoin has at least some of the following advantages: < /strong > /p >

< p > 1, as a medium of exchange, the cost of bitcoin paction is very low.

It takes centralization of the peer to peer network, which is confirmed by network users independently, without the need for a third party clearing house.

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< p > 2, compared with traditional currencies, bitcoin pactions are more secure, pparent and anti-counterfeiting.

Bitcoin encryption algorithm, hackers can not crack.

And bitcoin is easy to track, all bitcoin pactions are archived on the Internet, which can effectively prevent illegal activities.

Finally, the automatic authentication mechanism of bitcoin also makes it impossible to be forged.

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< p > 3, < a href= "http://fz.sjfzxm.com/" > bitcoin < /a > supply is limited, no inflation.

The design of bitcoin system is a little imitation of gold supply, with a ceiling of 21 million, which can effectively prevent inflation caused by the central bank's spamming.

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< p > 4, the relative anonymity of bitcoin is very attractive to people in crisis or countries with capital controls.

It is reported that many people believe that bitcoin can be used to evade high taxes, capital controls and property confiscation.

For example, when the Cyprus crisis happened in March 16th this year, the number of bitcoin users began to soar.

China now has a large number of people buying bitcoins.

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< p > 5, as bitcoin is accepted by more and more people, it may succeed in the market of winner take all.

Although many competitors appear now, Merrill Lynch believes that the e-money market is a winner take all market, and consumers will not be interested in using similar currencies.

The more popular bitcoin, the higher the entry threshold for competitors, and the more difficult they are to gain market share.

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< p > 6, from the perspective of asset allocation, bitcoin sensitivity to risk is small, which is very similar to gold.

For example, when the October FOMC meeting minutes hinted that the Fed's looser stance was less than expected, gold fell 1%, while bitcoin fell 3%.

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< p > < strong > but at the same time, the following shortcomings of bitcoin will become an obstacle to its becoming an international currency: < /strong > /p >

< p > 1, severe price fluctuations seriously affect the function of bitcoin value storage.

Although bitcoin will also be affected by some good news, the sharp fluctuation of bitcoin prices is more like an opportunistic behavior.

This fluctuation not only affects the value storage function of bitcoin, but also makes it impossible for some big businesses to accept bitcoin as a means of payment.

At present, bitcoin businesses are internally digesting their volatility and have not passed on to consumers, but Merrill Lynch does not think this behavior will continue.

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< p > 2, despite the high efficiency and pparency of bitcoin, regulators may still be included in the regulation so as to increase paction costs.

The government will not allow a new currency to be used for "black market" or tax evasion activities.

As long as bitcoin is regulated, paction costs will increase, and the advantage of low cost will be weakened.

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< p > 3, the qualification of bitcoin trading platform is doubtful.

Because most of the bitcoin users can not dig their own mines, they can only buy bitcoins through the bitcoin platform through local currencies.

Exchange rate risk is not to mention at the moment. Many bitcoin trading platforms are being hurt by hackers.

For example, in a report, the system of bitcoin trading platform Bitcoinica lost 18547 bitcoins because of being hacked.

Recently, European trading platform BIPS also lost 1295 bitcoins due to security incidents.

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< p > 4. At present, bitcoin's Mint is in the hands of miners.

With the popularity of bitcoin, the government has no Mint right and its seigniorage will be reduced.

This means that the government may prevent bitcoin from becoming bigger.

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< p > 5, payment confirmation delay up to 50 minutes, which will hinder the widespread application of bitcoin.

Bitcoin requires 50 minutes of confirmation delay after payment, during which bitcoin may be used by the buyer again.

This is not a problem between two trusted traders, because the seller believes that the buyer will not use it again.

But between two anonymous traders, this will produce a high, unhedged risk.

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< p > 6, bitcoin is not legal a href= "http://pop.sjfzxm.com/popimg/fz/index.aspx" > currency < /a >, which may not be conducive to its becoming an international currency.

Unlike legal tender, no one is obliged to accept bitcoin payment.

The value of bitcoin depends on the user's confidence. Once people expect its usefulness to decline, bitcoin will instantly disappear.

Continuous price fluctuations and hacker attacks will continue to have negative effects on consumers and investors' psychology.

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< p > in short, as a kind of electronic currency that breaks the traditional central bank issuing and government endorsement credit currency system, bitcoin has great imagination.

However, due to the limited supply of design principles, it is difficult for large-scale bitcoin to be used. At the same time, excessive speculation leads to huge price fluctuation and sharp increase in investment risk.

There will be no precedent for the development of bitcoin, but the Internet has already changed the mode of payment and financing in the financial industry, and it will not change the fundamentals of the financial industry in the future.

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