While this could be seen as strength the fact that bitcoin is a fiat currency which is accepted only on the perceived value of other bitcoin users makes it highly vulnerable to destabilization. Perhaps the biggest weakness of bitcoin is that it is not a recognized sovereign currency that is it is not backed by the full faith of any governing body. Individual bitcoins are created by computer code and their total value is.
Bitcoin is a virtual currency that was created in 2009 by an unknown computer whizz using the alias satoshi nakamoto. Cryptocurrencies such as bitcoin run on a technology called blockchain essentially a huge online database of transactions. Bitcoin is a cryptocurrency a form of digital money which can be bought with other currencies traded for them and where retailers accept it used to buy goods and services.
Instead units of digital currency are traded over a computer network that has some unique properties. This means it doesn t have a physical form. Bitcoin is a form of digital money.
Just as the merchant accepted usd with the assurance that the us government will accept it in exchange for gold someone accepting btc does so with the assurance that at least one of the merchants that he buys from will accept it from him and each of these merchants in turn makes the same calculation. It is backed up by every merchant willing to accept it in exchange for services. However there is another factor backing up a currency s value and this is the one bitcoin relies on.
In a sense bitcoin s value is derived from our common belief that bitcoin has value. Like most modern currencies bitcoin is not backed by gold or other precious commodities. The answer is nothing at all but that s actually not a bad thing.
Wondering what bitcoin is backed by.
