Bitcoin basics - read in the blog of the company COREDO

Bitcoin basics

Updated: 05.11.2020

When registering an ICO, trading cryptocurrencies, and getting a cryptocurrency license, it is crucial to remember that cryptocurrencies, especially Bitcoin, are a completely unprecedented phenomenon in the modern socio-economic world. For that matter, not everyone trusts the concept entirely and not everybody is prepared to invest their “real, paper” money that they had earned by hard work.

So, what is paper money? Technically, we can think of it as a contract concluded among people and governments. Basically, by agreeing with this contract, people agree that governments can have control over money including all key functions that this control inherits. In their turn, governments use the power given to them to keep people safe in terms of managing economic issues, redistributing wealth in society, and fighting crime. Now, many do not come to the conclusion, that Bitcoin works under the same conditions.

Therefore, we now need to answer the main questions that come up when Bitcoin is mentioned:

  • What was Bitcoin invented for?
  • Who defined the features of Bitcoin?
  • Who controls Bitcoin?
  • Can Bitcoin be destroyed?
  • How to obtain a license for cryptocurrency exchange?
  • How to obtain a license to establish an ICO?

Governmental control

Historically, not being able to live in full harmony with nature, humans came to willingly giving up their freedom for receiving protection from government. For that, government undertakes to protect its citizen from outer threats and to create laws.

Nevertheless, the relationships between people and government is not key here. It is the principle of their cooperation that is important. And, from an economic point of view, it can be applied differently. In fact, if people are extremely unsatisfied with the functioning of the traditional economy, they can turn to use money in other forms as well.

History of money

From ancient times we can see that governments abused their power numerous times: for example, banned the performance of certain transaction types or generated inflation by printing more money. It does not come as a big surprise that some governments can be opposing or limiting the new type of financial activity such as obtaining a crypto license or a license for cryptocurrency exchanges.

After all, some people became discouraged by governmental actions and did not trust the traditional contract. A redrawn contract then was supposed to keep a lot of traditional agreements yet prevent governments from conducting abuse and overusing their power.

Still, it does not mean that the new contract was more stable. The so-called “golden standard” had one crucial disadvantage – the gold itself. It is naturally not convenient when needed to split, move, or store. A replacement did not take long to come. Printed money can be produced truly easily and resolves the problems of gold. However, the new issue accompanies paper money. Who do we entrust with keeping track of the money supply?

Hence, a valuable lesson for the future development of money comes. People lose faith in the social contract if there is no reliable institution that would be efficient in guarantying the agreement.

Invention of bitcoin

Prior to registering an ICO and obtaining a license, it is crucial to understand how Bitcoin works. A person credited for the invention of Bitcoin, Satoshi Nakamoto, did not invent something absolutely new. He rather gave a new life to the known contract in order to make it more efficient.

Here are the simple distinctive rules of Bitcoin:

  • All users must follow the rules;
  • Only owners of tokens can use them;
  • A limited amount of bitcoins (21 million) can be issued;
  • No one has the prerogative to store bitcoins or become engaged in transactions with them.

A new type of contact

As mentioned earlier, protection is the reason why people need institutions. Yet gradually, as time passes, governments tend to control people’s lives in way more aspects than earlier as well as being overprotective. An example of such behavior is the fact of limitations imposed by some government on obtaining licenses for cryptocurrencies or using digital currencies. As history shows us, when overly restricted, people stop trusting the institutions and seek to replace the old contract. The cycle begins again.

Satoshi’s solution for this dilemma, Bitcoin, involves two dimensions:

  • reliance on protection from government can be abolished. Instead, Bitcoin would develop an exceptionally competitive market, where security becomes an object of trade;
  • providers can themselves define the sphere of their ownership.

Overall, Bitcoin forms the idea of a new contract where people have an opportunity to decide on the rules of the game. It is built on a simple principle: all holders of Bitcoins supplement and support the creation of an independent network of users.

We are now working on creating the second part of the post coming very soon.

In the meanwhile, if you have any additional questions about the cryptocurrency industry or already decided to participate in it by registering an ICO, contact COREDO. We will assist you in interpreting the regulations of jurisdiction of your choice and obtaining a license for cryptocurrency activities.


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