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What are the benefits of Bitcoin?

bitcoin casino us

What is bitcoin?

If you ask people around if they have heard anything about Bitcoin, then surely everyone will answer: “oh yes, of course.” Someone makes a lot of money from them, and entire states do not know how to relate to new technologies.

Nevertheless, what is bitcoin, how does it work, and why is it all needed? Why is this better than existing payment systems and where does the video card have to do with it?

Bitcoin is a payment system that uses the unit of the same name to record transactions. A monetary transaction, the result of which is recorded in the diary, is a transaction. A sequence of records in it (each of which is called a block) in it is a blockchain.

Bitcoin is very similar to gold, which cannot be copied – it can only be mined. But this is a very costly process both in terms of time and resources. This is one of the reasons gold is so prized. However, if people are involved in gold mining, then the computing power of computers provided by the participants in the transactions is used in mining. Roughly speaking, there is only one way to get more Bitcoins: process more transactions. Miners are providing more and more computing power. Because of this, the demand for video cards and for electricity is growing.

Benefits

  1. Decentralization

An important feature of Bitcoin that has led to its popularity is the decentralized nature of this payment system. In other words, Bitcoin is not under the control of a state, organization, or a specific person. The software code is completely open, and the participants of the system are scattered all over the world. Anyone who wants to join will be able to do so without hindrance. Transaction histories and fiat wallet balances are stored on special servers that are owned by financial institutions. Such repositories are often hacked, which is rather unpleasant for ordinary users. There is nothing in the Bitcoin system that can control the data. Moreover, all data on this network is publicly available. And, as we saw above, it is almost impossible to change them. Decentralization is the main reason for using bitcoin at bitcoin casinos.

2. Anonymity

Unlike traditional financial systems, Bitcoin does not require you to authenticate with your passport data. You are your address on the Bitcoin network. You can get as many addresses as you like. The ability to make financial transactions will depend only on whether you have enough funds in your account. And by the way, anyone can calculate the state of your account, but they cannot know anything about you, except for the history of transactions and your wallet address.

3. Stability

It is impossible to change any block in the blockchain. It’s almost impossible. Otherwise, a huge number of records on millions of computers around the world would have to be changed simultaneously. Therefore, no transaction can be canceled or replaced with another.

4. Limited emission

Traditional fiat money has an unlimited emission, since central banks can always print as much money as they need. Let’s remember the analogy with gold. The more difficult gold is mined and the less its reserves, the more valuable it is. This is an inflation control mechanism. A similar mechanism is implemented in Bitcoin: the system gradually reduces the amount of total bitcoins mined per unit of time. It looks like an inverse proportional function. And yes, someday there will come a moment after which the number of bitcoins in the world will become a constant. Just like the amount of gold reserves on Earth.

Transparency, speed, cost, simplicity. If you have sent cryptocurrency or information on the blockchain, the evidence of such sending cannot be altered or faked, since it is confirmed by hundreds of thousands of computers around the world. Many copies of this information are stored on the same computers – and it is available for viewing by any user at any time. The entire transfer process takes a few minutes and is ten times cheaper than a bank transfer. If you store money and information on the blockchain, records will never be lost or tampered with, any market participant can at any time ascertain your financial solvency. No third parties and intermediaries, only complete transparency and mathematical guarantee of the accuracy of calculations.

How safe is it?

If we talk about the security of a spherical payment system in a vacuum, then Bitcoin is very reliable. For all the time of existence since 2009, only one case was recorded in which a code malfunction led to an error.

Cracking private keys

To protect against fraud, all transactions are transmitted over the network along with a digital signature. It allows you to ensure that the message was successfully delivered to the selected address and that the message has not been modified.

The digital signature is created using a hashing algorithm and asymmetric encryption.

The principle of asymmetric encryption can be explained as follows:

Let each participant in the parcel exchange have a personal lock and a key to it. If participant A wants to receive a secret package from participant B, then he sends him his lock. Participant B clicks the lock on the secret package and sends it to participant A. Having received the package, participant A opens the lock with the key and receives the package. In this analogy, the public key is the lock, and the private key is the key. Cracking the private key can make it possible to change the recipient’s address or the contents of the package.

Private keys are associated with bitcoin addresses by SHA-256 hashing function. It issues the cipher as a sequence of 256 bits. That is, 2 ^ 256 = 10 ^ 77 hash options are possible. At present, the computing power of all computers around the world would not be enough to sort out all the options in a reasonable time.

The threat is becoming real with the development of quantum computers. So far, this threat is distant (there is confirmation here), but it still exists.

Attack 51%

The principle of this attack is as follows: while the attacker has more power at his disposal than the rest of the network, he may not confirm other people’s blocks, only confirming his own, which means he can receive 100% of all new bitcoins and block any transactions at his discretion.

In the early stages of cryptocurrency development, this threat is very significant. At the moment, to carry out such an attack on the Bitcoin network, computing power is required many times higher than the power of all supercomputers from the TOP-500 rating (500 most powerful supercomputers in the world). After the massive transition of miners from video cards to integrated circuits specially designed for bitcoin mining, the protection against such an attack has become even stronger. In addition, with such a breach, attackers do not have the ability to conduct any transactions at their discretion, since they do not have other people’s private keys required to sign transactions.

There is a similar “Sybil Attack” in which attackers can avoid real nodes on the network if they create a sufficient number of fake or identical (Sybil identifiers). They can then refuse to send or receive blocks, effectively blocking other users on the network. Consensus algorithms such as Proof-of-Work and Proof-of-Stake do a good job with this threat.

The security of a payment system does not mean complete security of its use. There are a huge number of examples of successful attacks on crypto exchanges using Bitcoin and similar cryptocurrencies.

How is this possible if Bitcoin’s algorithm is so reliable? It’s simple, almost all attacks, hacks and thefts in the field of cryptocurrencies are somehow related to the vulnerability of the infrastructure: cryptocurrency exchanges, wallets and third-party private key stores. Nobody cancels the human factor: for some attackers it is enough to have the gift of persuasion.

Therefore, it is worth remembering that if a thief stole the keys from your pocket, this does not mean that he will definitely break your lock. But on the other hand, no matter how cool your lock is, it will be bad if you lose the key to it.

Legislative regulation

The legal regime for bitcoin varies considerably from country to country. In some countries, bitcoins are recognized as a currency of account (for example, in Germany), in others (for example, in Japan) Bitcoin is legal tender with a purchase tax. In some countries (for example, in China), bitcoin transactions are prohibited for banks, but are allowed for individuals (but the country is leading in the field of mining due to the presence of the largest production facilities). In Switzerland, cryptocurrencies are subject to the same rules as foreign currencies, and this country is one of the most favorable jurisdictions for Bitcoin startups.