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To understand its advantages as a payment system, let's start by remembering such a method of payment as a bank check. The most likely in real life most of us did not come across this, but they were probably seen at least once in American films, especially in the 1980s and 1990s (by the way, America still uses this method of payment, although it has lost much popularity).
So, we want to pay some Angela money for some services. We take a checkbook, pull out a check from it, enter the name, amount and signature. Receiving the check Angela is happy, you are happy, everything is fine, because if Angela loses a check, another person can not withdraw money from him if he is not the full namesake of this absent woman. And if you lose a checkbook, it will not give you access to your money, because checks are not backed up by your signature. However, for you and Angela there are risks.
First, Angela, having fulfilled her part of the contract, can not be sure that there is a necessary amount in your bank account. She can not even be sure that you have a bank account. And even if you are not a deceiver, it's all right, then it may take a long time for the bank to cash a check.
Secondly, the loss of your checkbook, if the fraudsters are aware of other data, may threaten to forge your signature and cashing checks, which means losing money.
With cash everything is much simpler, but it is difficult to transfer it to a distance much greater than the distance of the outstretched hand. So what is the essence of bitcoin and its advantages?
So, we send money to Angela using bitcoins. This currency, unlike a bank, is stored on your electronic wallet, computer or phone. To send funds, we need to know the bitcoin address of the recipient. When the money is sent, you can spend it only with the secret key, which is stored in the recipient's program, in this case Angela, and no one else can dispose of them without physical access to the wallet.
The process of transmission is as follows: we create a transaction, i.e., a money transfer transaction. The application automatically puts our digital signature on this transaction and sends information to the global network. Yes, the whole world sees that this transfer took place. But taking into account the anonymity of bitcoins, it is impossible to determine the numbers of a living person.
After other users of the network have received the information about the transfer, they check the presence on my wallet of the necessary amount of money and the electronic signature in the transaction and mark the operation as valid, and the operation is sent to the so-called block of a block or chain of blocks and is stored therein. In more detail this point we will cover further, but for now we delve into the principle itself.
At the moment when we started the transaction, Angela's phone along with other users confirms the authenticity of the operation and possession of the secret code allows it to get the right to dispose of this amount. Thanks to the fact that now there are thousands of computers in the network of bitcoins, the speed of such operations is almost instantaneous and money is available in a matter of seconds.In simple terms, our translation operation is nothing more than the official notification of all bitcoin users that you have transferred the right to use the example of the 50th Bitcoin to Angela, and they do not belong to you anymore. And the witnesses confirmed this.
The difference between traditional bank transfer and bitcoin transfer is as follows:
Translation speed. When banking transfers your operation is confirmed by a bank that simultaneously processes a large number of such transactions. When you translate bitcoin, your operation can be confirmed by any member of the network, which saves time. It takes a few seconds to transfer small amounts to bitcoins. The big ones are up to half an hour. Bank SWIFT payment can take several banking days and you are dependent on the working time of the branch.
Security. The difference between a physical signature and a digital one is quite large. If in the case of a checkbook to forge your signature can more or less intelligent calligrapher, then hacking and forging a digital signature is almost impossible. We need a hacker of the level of Satoshi Nakamoto, a Japanese hacker and bitcoin founder, who, you see, is much harder to find on our expanses, and his services will be much more expensive.
Economical. As we said in the first paragraph, the speed of transactions is very high due to decentralization of management and control over transfers. But that is not all. The commission that is paid for the transfer does not depend on the amount that we send, and is minimal as compensation to the participants of the bitcoin network. Thus sending 2 dollars and sending 20 thousand dollars will be equally fast and cheap.
And, finally, coverage! Given that to transfer money you only need software installed on a computer or mobile phone, it does not matter where you and your translation partner are geographically, and whether there are WesternUnion offices there. Bitcoin is transmitted to any distance, anywhere in the world, at the same speed.
The bitcoin payment network also has advantages over a number of payment systems such as WebMoney, Qiwi, YandexMoney, due to the same anonymity and decentralization.
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