Distinctions from fiat money

Distinctions from fiat money

1. Regular currencies (dollars, euros, yen, etc.) have an unlimited supply. This means that  central banks can print as much money as they want, with the aspiration to manipulate a currency's value compared to others. Consequently, users of the currency have to bear the costs. The supply of bitcoins is tightly controlled by the underlying algorithm. Every hour, a small number of new bitcoins is issued and will continue its trickle to do so at a diminishing rate until a maximum of 21 million has been reached. What will happen is that if demand grows and the supply remains the same, the value will increase, which makes bitcoin more attractive.

2. During money transaction, as we know it, senders are usually identified (for verification purposes, and to comply with anti-money laundering and other legislation). An advantage of bitcoins is that despite the strict transaction recording in a public log (blockchain), the identity of supplier and consumer remains uncovered. The only way of identification is the wallet ID, so transactions can be tracked. This is because there is no third party involved and users do not have to identify themselves during an electronic bitcoin payment. Once a transaction request is submitted, the protocol checks all previous transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them. Therefore, the identity of each party in the transaction is unnecessary. One of many reasons for the rise in demand for bitcoins as an alternate currency is that it allows users to buy and sell any good or service easily without following back to them. Party for drug dealers, criminals, terrorists and money-launderers! Despite its independence from the government, law enforcement has developed methods to identify users if necessary.

3.   Unlike current traditional transactions, bitcoin transactions cannot be reversed, due to the absence of central "validator" that can allow it. If a transaction is embedded in the network, and more than an hour has passed, it is permanent.

4.   It is quite divisible. The smallest unit of a bitcoin is called a satoshi and is one hundred millionth of a bitcoin (0.00000001). This is, at today's prices, about one hundredth of a cent. This could enable microtransactions that traditional electronic money cannot.

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