In general, the price of bitcoin is not stabilized yet. In particular, it is still very volatile, as seen during June-July 2016. As usual with currencies, price stabilization happens only on a specific scale and over time scales.
For Bitcoin, it is essential to wait for a new scaling consensus on resolving transaction delays that are in progress. But in the meantime, it has already been observed a stabilization in specific use cases for bitcoin, which seems to be happening through decentralization and privacy-enhancing technologies.
For example, if you want to buy some groceries or take a bottle of wine at the local shop, nobody needs to know that you are using bitcoins right now. However, things change if you want to use bitcoins for specific professional or business needs.
Then, privacy and anonymity requirements lead to centralization through companies like bitpay and coinbase, which apply know your customer (KYC) and anti-money laundering (AML) policies.
For bitcoin, the best scaling consensus to date was reached during summer 2015 when 80% of the miners agreed to adopt a scaling solution that would double the block size. However, this consensus was broken because one miner wanted smaller blocks and started to mine so-called empty blocks.
To counter this attack on bitcoin’s consensus mechanism, a change was introduced in November 2015: now the only requirement is that each block contains a so-called coinbase transaction which includes a minimum payment to the miner as an incentive for having transactions in his block.
In the future, this consensus change will also prevent attacks on bitcoin’s privacy-enhancing features since now these payments carry some guarantee from miners, so they have been proven not to steal amounts from those transactions.
What is the importance of anonymity and decentralization in the bitcoin network?
Anonymity is helpful for users who want to protect their privacy. For example, this can be used to buy goods on dark markets and pay with bitcoins without revealing your identity.
Anonymity is also essential for businesses that don’t want their competition to know how many resources they have or which countries they use to generate their resources. This is known as a competitive advantage.
Decentralization is the basis for bitcoin’s trustless consensus mechanism, where anyone can participate in verifying transactions and mining blocks without being dependent on a third party.
It also provides censorship resistance, so nobody has the power to “turn off” bitcoin, for example, by turning off a DNS or blocking a website. https://profit-maximizer.app/ helps you learn more about Bitcoin.
What is the role of bitcoin in all this decentralization and anonymity?
Is it just for freedom, or does it have other usages? Open means that anyone can participate without asking anyone else.
Instead, several thousands of developers maintain the code, and at least seven companies worldwide have offered to host services for full bitcoin nodes, which contain all transactions since 2009.
As mentioned above, anonymity protects users’ freedom to buy goods without revealing their identity. But, unfortunately, this also implies that any business can use bitcoin without anyone knowing exactly what they are doing with it.
Regardless of whether they operate locally or for a specific country, any company can now quickly pay their suppliers and employees without the country’s government knowing which other businesses those companies might be involved with.
Last Updated on February 25, 2022 by Dave Clark