Crypto for newbies: what are the differences with legal currencies

Unlike other fiat currencies, bitcoins have a unique feature: no one can control their value due to the decentralized nature of the currency's creation method

by Lorenzo Ciotti
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Crypto for newbies: what are the differences with legal currencies

Unlike other fiat currencies, bitcoins have a unique feature: no one can control their value due to the decentralized nature of the currency's creation method, although questions have been raised about decentralization, such as by Elon Musk who said is actually highly centralized, describing the episode of the flooding of a single coal mine in Xinjiang which caused, according to various newspapers, a drop in the computing power or hashrate of the Bitcoin network by 35%.

In Bitcoin, the amount of currency in circulation is limited; moreover it is perfectly predictable and therefore known by all its users in advance. Inflation from currency in circulation cannot therefore be used by a central body to redistribute wealth among users.

Transfers are defined as a change of ownership of the currency and are carried out without the need for an external body to supervise between the parties. This mode of interchange makes it impossible to cancel the transaction and therefore to regain possession of the coins that have changed ownership.

Crypto for newbies: what are the differences with legal currencies

The Bitcoin client broadcasts the transaction to its closest nodes, which verify its authenticity and the availability of funds, and in turn relay it to the nodes they are connected to.

The total number of bitcoins tends asymptotically to the limit of 21 million. The availability of new coins grows as a geometric series every 4 years. In 2013 half of the possible coins were generated and by 2017 it will be three quarters.

In this way, in about 136 years, after 33 halvings spaced out about 4 years apart, all the coins will be generated. As that date approaches and assuming that the demand for bitcoins will grow more than proportionally to their availability, bitcoins will probably suffer a deflation in value, an increase in real value, due to the scarcity of new currency.

However, bitcoins are divisible to eight decimal places, making the total 2.1 x 1015, allowing for full adjustment of value in a deflationary environment. According to the developers, in an environment with a bitcoin shortage, nodes, rather than financing themselves with the creation of new bitcoins, will profit from their ability to carry out transactions, thus competing on prices and keeping them low.

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