“Bitcoin ” and “electronic money” are similar concepts, but there are significant differences. Below are the important differences between the two.
Electronic money is a method of making payments in certain currencies without bills or coins. Payment methods include online payments or contactless payments, which are often used at convenience stores or when paying for trains or trains. Many people already use this electronic money in their daily lives. Electronic money is convenient and fast. You don’t have to physically take out coins or bills from your wallet.
Bitcoin also has no banknotes or coins and offers all the benefits of electronic money, including speed and convenience. In this context, it makes sense to think of bitcoin as electronic money. However, Bitcoin is more than that. Electronic money is usually used as a payment method within certain regions.
For example, in Japan, electronic money is used instead of yen bills or coins. However, the user must put the yen in his bank account or deposit money from an ATM machine. More detail is available here https://cryptotrader.software.
This is virtually the same as paying in yen, with or without physical currency. However, Bitcoin does not need to put money in the account or deposit money at ATMs. In order to use Bitcoin, you must first exchange existing currencies such as yen with Bitcoin. Once you have converted to Bitcoin, you can purchase goods with Bitcoin.
Once you have completed the exchange, Bitcoin and electronic money transactions are similar. Just pay at a store or website that accepts bitcoins. Bitcoin is sent to the merchant and at the same time the same amount of Bitcoin is taken out of the user’s digital wallet.
Finally, Bitcoin is a currency like the dollar and the yen. Electronic money is a system developed as a payment method that does not use bills or coins. Thus digital currency is not like electronic money
Bitcoin rate is calculated via a global computer network
But how does the Bitcoin system work at all? The Bitcoin value is not determined by central banks, but is calculated around the world via a decentralized computer network. A Bitcoin client and an Internet connection are required to participate in the network. The Bitcoin client manages a digital wallet. Business people who offer their customers payment with Bitcoins also need one. This is possible, for example, in various online shops and restaurants.
All transactions carried out with bitcoins are stored publicly and transparently in a huge database (“blockchain”). The size was 135 GB in September 2017. The blockchain acts as an account statement, and new elements are regularly added to its bottom end. There are numerous copies of the blockchain database worldwide, which are continuously updated by volunteers. The blockchain system is supposed to offer sufficient protection against fraudsters due to the decentralized structure and provides information about all transactions ever made with Bitcoins.
Bitcoins owners remain anonymous
While the blockchain is publicly viewable, the owners of the bitcoins remain anonymous. Only they can carry out Bitcoin transactions. A Bitcoin address and the associated password are required to access the Bitcoins. If this private key is lost, the bitcoins under this digital ‘account’ are no longer accessible. The owner faces a total loss. Because of the anonymity of payments, cryptocurrency is becoming increasingly popular among criminals. Various encryption Trojans are already demanding that their victims make transfers to Bitcoins to decrypt the hijacked devices.
Bitcoin money supply limited to 21 million bitcoins
How do you get bitcoins? Bitcoins are created when you voluntarily provide the computing capacity required to manage Bitcoin transactions. The helpers (“miners”) must confirm the transactions, which are then entered as a block in the blockchain. The total money supply of the digital currency is limited to 21 million bitcoins, 16 million bitcoins were already on the market in November 2017. Since extremely powerful computers that consume a lot of electricity are required to create new bitcoins, the high energy consumption for the so-called “mining” of bitcoins is another point that is criticized in the system.
Bitcoins can also be exchanged traditionally for existing currencies. The rapid increase in Bitcoin prices in 2017 was caused, among other things, by plans from the US futures exchange CME, which wants to realize a financial product in the form of a Bitcoin future. This could allow investors to speculate on a rising or falling bitcoin price.