July 24, 2019 | AtoZ Markets – In the Second World War, the victorious countries established a global financial system that they had to impose their domination over world economies through the International Monetary Fund, whose purpose was to assist in the reconstruction of countries affected by the effects of the war. The Bank’s policy on interest-bearing lending has been adopted by rich and rich countries to lend to poor countries. Thus, countries begin to pay interest on loans for long years, which may limit their development because of the increase in interest rates. The world’s economies relied on foreign currency, the currencies of the IMF’s lending countries in trade such as the US dollar and the pound. These currencies were pegged to gold and precious metals at the beginning and when the dollar began to swell as a result of the Vietnam War, world oil prices were pegged to the dollar.
The digitized or encrypted currency, headed by Bitcoin, is a virtual currency which is not monetary and does not supervise the printing or issuing of any central bank. Digital currency ownership is documented in encrypted records stored on computers. Bitcoin was established by an anonymous person named Satoshi Nakamoto, and began trading in 2009. Bitcoin does not rely on a broker or a central register. The currency is traded between the seller and the buyer without any intermediary. The digital currency is registered in encrypted records around the world. In other words, no one knows how much your money is, not a bank employee, government or anyone else.
For example, if you go to a store and buy a piece of clothing and pay by credit card, the bank is the intermediary between you and the seller. Even if you pay cash, the central bank is the mediator where it issued the currency. If you use the digital currency, for example, when buying a piece of clothing, you pay through a digital wallet saved on your mobile phone and the seller has a machine similar to the payment machine with credit card, you pay directly to the seller. When the process is done, ownership of the digital currency changes from your portfolio to the seller’s portfolio. The change of ownership over computer networks around the world is soon spread in a decentralized way called Blockchain . That is, there is no computer or central bank operating or aware of the parties and that no change to a transaction performed over Blockchain can be made without the approval of the seller and the buyer together.
Blockchain is a decentralized process used to document electronic sales and purchases by feeding a wide range of computers with the process of transfer and change of ownership. Any process must be documented on 51 per cent of the network before it is completed. Once the original owner has been authenticated, the conversion process is done and the new owner is documented in an encrypted manner without knowing any information about the old or new owner. Thus, the process does not require a central computer or any organizational sector to complete the process.
Banks, governments and financial intermediaries have also begun using the Blockchain technology on which Bitcoin relies.
The value of banknotes is determined by governments, supply and demand, market economies, inflation and internal and external debt. The printing of paper currency is done according to need and is a controlled process, especially when talking about foreign currency. Bitcoin is a currency limited in minting. The number of Bitcoins in the future will not exceed 21 million coins.
The process of transferring ownership and documenting operations is carried out by companies or individuals via specialized computers spread around the world. In return, these companies or individuals acquire empty chains, which are new parts of the digital currency according to the number of transactions they perform.