Bitcoin’s Market Cap Surpasses the IMF’s Special Drawing Rights Reserves

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Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence.

Bitcoin is the first implementation of a concept called "cryptocurrency", which was first described in by Wei Dai on the cypherpunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority. The first Bitcoin specification and proof of concept was published in in a cryptography mailing list by Satoshi Nakamoto.

Satoshi left the project in late without revealing much about himself. The community has since grown exponentially with many developers working on Bitcoin. Satoshi's anonymity often raised unjustified concerns, many of which are linked to misunderstanding of the open-source nature of Bitcoin.

The Bitcoin protocol and software are published openly and any developer around the world can review the code or make their own modified version of the Bitcoin software. Just like current developers, Satoshi's influence was limited to the changes he made being adopted by others and therefore he did not control Bitcoin. As such, the identity of Bitcoin's inventor is probably as relevant today as the identity of the person who invented paper. Nobody owns the Bitcoin network much like no one owns the technology behind email.

Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the software, they can't force a change in the Bitcoin protocol because all users are free to choose what software and version they use. In order to stay compatible with each other, all users need to use software complying with the same rules.

Bitcoin can only work correctly with a complete consensus among all users. Therefore, all users and developers have a strong incentive to protect this consensus. From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them.

This is how Bitcoin works for most users. Behind the scenes, the Bitcoin network is sharing a public ledger called the "block chain". This ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending bitcoins from their own Bitcoin addresses.

In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in bitcoins for this service.

This is often called "mining". To learn more about Bitcoin, you can consult the dedicated page and the original paper. There are a growing number of businesses and individuals using Bitcoin. This includes brick-and-mortar businesses like restaurants, apartments, and law firms, as well as popular online services such as Namecheap, Overstock.

While Bitcoin remains a relatively new phenomenon, it is growing fast. At the end of Aprilthe total value of all existing bitcoins exceeded 20 billion US dollars, with millions of dollars worth of bitcoins exchanged daily. While it may be possible to find individuals who wish to sell bitcoins in exchange for a credit card or PayPal payment, most exchanges do not allow funding via these payment methods.

This is due to cases where someone buys bitcoins with PayPal, and then reverses their half of the transaction. This is commonly referred to as a chargeback. Bitcoin payments are easier to make than debit or credit card purchases, and can be received without a merchant account.

Payments are made from a wallet application, either on your computer or smartphone, by entering the recipient's address, the payment amount, and pressing send.

To make it easier to enter a recipient's address, many wallets can obtain the address by scanning a QR code or touching two phones together with NFC technology. Much of the trust in Bitcoin comes from the fact that it requires no trust at all. Bitcoin is fully open-source and decentralized.

This means that anyone has access to the entire source code at any time. Any developer in the world can therefore verify exactly how Bitcoin works. All transactions and bitcoins issued into existence can be transparently consulted in real-time by anyone.

All payments can be made without reliance on a third party and the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking. No organization or individual can control Bitcoin, and the network remains secure even if not all of its users can be trusted.

You should never expect to get rich with Bitcoin or any emerging technology. It is always important to be wary of anything that sounds too good to be true or disobeys basic economic rules. Bitcoin is a growing space of innovation and there are business opportunities that also include risks. There is no guarantee that Bitcoin will continue to grow even though it has developed at a very fast rate so far.

Investing time and resources on anything related to Bitcoin requires entrepreneurship. There are various ways to make money with Bitcoin such as mining, speculation or running new businesses. All of these methods are competitive and there is no guarantee of profit. It is up to each individual to make a proper evaluation of the costs and the risks involved in any such project.

Bitcoin is as virtual as the credit cards and online banking networks people use everyday. Bitcoin can be used to pay online and in physical stores just like any other form of money.

Bitcoins can also be exchanged in physical form such as the Denarium coinsbut paying with a mobile phone usually remains more convenient. Bitcoin balances are stored in a large distributed network, and they cannot be fraudulently altered by anybody. In other words, Bitcoin users have exclusive control over their funds and bitcoins cannot vanish just because they are virtual. Bitcoin is designed to allow its users to send and receive payments with an acceptable level of privacy as well as any other form of money.

However, Bitcoin is not anonymous and cannot offer the same level of privacy as cash. The use of Bitcoin leaves extensive public records. Various mechanisms exist to protect users' privacy, and more are in development.

However, there is still work to be done before these features are used correctly by most Bitcoin users. Some concerns have been raised that private transactions could be used for illegal purposes with Bitcoin.

However, it is worth noting that Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems. Bitcoin cannot be more anonymous than cash and it is not likely to prevent criminal investigations from being conducted. Additionally, Bitcoin is also designed to prevent a large range of financial crimes.

When a user loses his wallet, it has the effect of removing money out of circulation. Lost bitcoins still remain in the block chain just like any other bitcoins. However, lost bitcoins remain dormant forever because there is no way for anybody to find the private key s that would allow them to be spent again.

Because of the law of supply and demand, when fewer bitcoins are available, the ones that are left will be in higher demand and increase in value to compensate. The Bitcoin network can already process a much higher number of transactions per second than it does today.

It is, however, not entirely ready to scale to the level of major credit card networks. Work is underway to lift current limitations, and future requirements are well known. Since inception, every aspect of the Bitcoin network has been in a continuous process of maturation, optimization, and specialization, and it should be expected to remain that way for some years to come.

As traffic grows, more Bitcoin users may use lightweight clients, and full network nodes may become a more specialized service. For more details, see the Scalability page on the Wiki. To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions such as Argentina and Russia severely restrict or ban foreign currencies.

Other jurisdictions such as Thailand may limit the licensing of certain entities such as Bitcoin exchanges. Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system.

Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.

Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks.

Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures. Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established.

The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted.

In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.

The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions.

However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world. It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country.

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Ripple is a real-time gross settlement system RTGS , currency exchange and remittance network created by the Ripple company.

Also called the Ripple Transaction Protocol RTXP or Ripple protocol, [3] it is built upon a distributed open source internet protocol , consensus ledger and native cryptocurrency abbreviated as XRP ripples.

Released in , Ripple purports to enable "secure, instantly and nearly free global financial transactions of any size with no chargebacks. The network can operate without the Ripple company. Used by companies such as UniCredit , UBS and Santander , Ripple has been increasingly adopted by banks and payment networks as settlement infrastructure technology, [10] with American Banker explaining that "from banks' perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like bitcoin.

As of the first week of March , XRP is the third largest coin by market capitalization. The predecessor to the Ripple payment protocol, Ripplepay, was first developed in by Ryan Fugger, [14] [15] a web developer in Vancouver, British Columbia. Fugger's first iteration of this system, RipplePay. After discussions with long-standing members of the Ripple community, Fugger handed over the reins.

The bitcoin Bridge allows Ripple users to send a payment in any currency to a bitcoin address. By , Ripple Labs was involved in several development projects related to the protocol, releasing for example an iOS client app for the iPhone that allows iPhone users to send and receive any currency via their phones. Since , the protocol has been adopted by an increasing number of financial institutions to "[offer] an alternative remittance option" to consumers.

Fidor is an online-only bank based in Germany. The partnership marked the first network usage of the Ripple protocol. In February , Fidor Bank announced they would be using the Ripple protocol to implement a new real-time international money transfer network, [44] and in late April , it was announced that Western Union was planning to "experiment" with Ripple.

The year and marked the expansion of Ripple company with the opening of an office in Sydney , Australia in April [49] and the opening of European offices in London , United Kingdom in March [50] then in Luxembourg in June On September 23, , Ripple announced the creation of the first interbank group for global payments based on distributed financial technology.

The group will "oversee the creation and maintenance of Ripple payment transaction rules, formalized standards for activity using Ripple, and other actions to support the implementation of Ripple payment capabilities. Ripple's website describes the open-source protocol as "basic infrastructure technology for interbank transactions — a neutral utility for financial institutions and systems.

In Ripple, users make payments between each other by using cryptographically signed transactions denominated in either fiat currencies or Ripple's internal currency XRP. For XRP-denominated transactions Ripple can make use of its internal ledger, while for payments denominated in other assets, the Ripple ledger only records the amounts owed, with assets represented as debt obligations.

In order to send assets between users that have not directly established a trust relationship, the system tries to find a path between the two users such that each link of the path is between two users that do have a trust relationship. All balances along the path are then adjusted simultaneously and atomically. It has similarities to the age-old hawala system. A gateway is any person or organization that enables users to put money into and take money out of Ripple's liquidity pool.

Furthermore, gateways redeem ledger balances against the deposits they hold when currency is withdrawn. In practice, gateways are similar to banks, yet they share one global ledger known as the Ripple protocol. Depending on the type and degree of interaction a user has with a gateway, the gateway may have anti-money laundering AML or know your customer KYC policies requiring verification of identification, address, nationality, etc.

Furthermore, the user must put a quantitative limit on this trust and create a similar limit for each currency on deposit at that gateway. Though their total balance doesn't alter, users earn a small transit fee for providing inter-gateway liquidity.

Similar to reasons during the Free Banking Era in the United States, the value of a currency can vary significantly depending on a gateway's creditworthiness. A non-profit trade association , the International Ripple Business Association IRBA , provides unified procedures and disclosure standards for gateways. Ripple relies on a common shared ledger, which is a distributed database storing information about all Ripple accounts.

The network is "managed by a network of independent validating servers that constantly compare their transaction records. Ripple Labs is currently assisting banks in integrating with the Ripple network. A transaction is any proposed change to the ledger and can be introduced by any server to the network. The consensus process is distributed, [92] and the goal of consensus is for each server to apply the same set of transactions to the current ledger. Each round of consensus reduces disagreement, until the supermajority is reached.

While users may assemble their own UNL nodes and have full control over which nodes they trust, Ripple Labs acknowledges that most people will use the default UNL supplied by their client.

In early , [93] a rival company called the Stellar Foundation [94] experienced a network crash. Mazieres declared the Stellar system unlikely to be safe when operating with "more than one validating node," [95] arguing that when consensus is not reached, a ledger fork occurs with parts of the network disagreeing over accepted transactions. Ripple allows users or businesses to conduct cross-currency transactions [98] in 3 to 5 seconds.

Payments can only be authorized by the account holder and all payments are processed automatically without any third parties or intermediaries. The bitcoin bridge is a link between the Ripple and bitcoin ecosystems. The bridge makes it possible to pay any bitcoin user straight from a Ripple account without ever needing to hold any of the digital currency. Additionally, any merchant accepting bitcoins has the potential to accept any currency in the world.

For example, a Ripple user may prefer to keep money in USD and not own bitcoins. A merchant, however, may desire payment in bitcoin. The bitcoin bridge allows any Ripple user to send bitcoins without having to use a central exchange such as BTC-e to acquire them.

While transaction information on the ledger is public, payment information is not. Any user on Ripple can act as a market maker by offering an arbitrage service such as providing market liquidity , intra-gateway currency conversion , rippling, etc. Market makers can also be hedge funds or currency trading desks.

According to the Ripple website, "by holding balances in multiple currencies and connecting to multiple gateways, market makers facilitate payments between users where no direct trust exists, enabling exchanges across gateways.

Ripple can be used to trade or convert currencies, to send money in one currency and the recipient to receive it in another currency. One of the earliest extensions by third-party developers was a Ripple extension to e-commerce platform Magento , which enables Magento to read the Ripple public ledger and create an invoice. There has been a Ripple Wallet payment option developed for retail situations as well [34].

XRP is the native currency of the Ripple network. XRP are currently divisible to 6 decimal places, and the smallest unit is called a drop with 1 million drops equaling 1 XRP. The other currencies in the Ripple network are debt instruments i. The purpose for this requirement is discussed in the anti-spam section. Of the billion created, 20 billion XRP were retained by the creators, who were also the founders of Ripple Labs. The escrow will allow them to use up to 1 billion monthly and return whatever is unused at the end of each month to the back of the escrow queue in the form of an additional month-long contract, starting the process all over.

One of the specific functions of XRP is as a bridge currency, [] which can be necessary if no direct exchange is available between two currencies at a specific time, [] for example when transacting between two rarely traded currency pairs.

The feature is also intended to expose more of the network to liquidity and better FX rates. When a user conducts a financial transaction in a non-native currency, Ripple charges a transaction fee.

The purpose of the fees is to protect against network flooding by making the attacks too expensive for hackers. If Ripple were completely free to access, adversaries could broadcast large amounts of "ledger spam" i. This transaction fee is not collected by anyone; the XRP is destroyed and ceases to exist. Since its debut the Ripple protocol has received a fair amount of attention in both the financial and mainstream press.

Though XRP is third in market capitalization to bitcoin as a digital currency, [] many members of the press have described Ripple as an up-and-coming rival to bitcoin. In late , Bloomberg called bitcoin a "failing" digital currency, after bitcoin's currency fell 54 percent in value in one year. Ripple was described as a significant competitor, in part because of its real-time international money transfers.

Ripple is the winner. The reaction to XRP is polarized in the crypto-currency community. However, Esquire countered in that "if that is devious, then so is every company that's ever gone public while retaining the great bulk of its shares. Ripple has also been criticized for not being truly decentralized, or for using only a few core validation nodes for transaction consensus, compared to Bitcoin and Ethereum in the five digits. Bitcoin developer Peter Todd notes, "..

Ripple's technical documentation doesn't make any of these risks clear — nowhere do they describe in detail how nodes can fall out of consensus with one another if their UNLs Unique Node List don't match. From Wikipedia, the free encyclopedia. Retrieved May 14, Retrieved January 25, Retrieved June 9, The Wall Street Journal Pro. Retrieved January 28, Ripple is HTTP for money".

Retrieved January 26, Institute of International Finance. Retrieved August 17, Retrieved August 19, The New York Times. The New York Times Company. Retrieved February 6, Internet and Network Economics: Institute of Electrical and Electronics Engineers.

Retrieved January 27, Retrieved 18 March Archived from the original on February 7, Stanford Graduate School of Business. Venkatesh October 8,