Both are referred to as “bitcoin. It is created and held electronically. Bitcoins aren’t printed, like dollars or euros — they’re produced by computers all around the world, using free software. It was the first example of what we today call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography.
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The idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way. To this day, no-one knows who Satoshi Nakamoto really is. In what ways is it different from traditional currencies? Bitcoin can be used to pay for things electronically, if both parties are willing.
In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally. But it differs from fiat digital currencies in several important ways: No single institution controls the bitcoin network. It is maintained by a group of volunteer codersand run by an open network of dedicated computers spread around the world.
This attracts individuals and groups that are uncomfortable with the control that banks or government institutions have over their money. Bitcoin solves the “double spending problem” of electronic currencies in which digital assets can easily be copied and re-used through an ingenious combination of cryptography and economic incentives.
In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. With bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. Holders of the currency and especially citizens with little alternative bear the cost.
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With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. It seems as if the situation only grows worse as more time progresses. The G7 setback can turn out to be rather problematic. During the latest meeting, the objective was to create a free, fair, and mutually beneficial trading ecosystem for all parties involved. President Trump seemingly agreed at first, yet backed out of the deal in the end. Instead, he is showing signs of US-oriented isolationism, which will further fracture the brittle global economy.
IMF chief Christine Lagarde shares her concerns regarding this topic. She is convinced Trump is challenging the way trade is conducted and aims to damage business confidence.