Bitcoin offers significant improvements in transparency over current financial transactions and ledgers. It seems there is always a new case of an employee or CEO of a company that has committed fraud by manipulating transactions and covering it up.
After investigation, the factors that allowed the fraud to occur often include lack of transparency, people were unaware of the transactions, insufficient auditing, or checking of transactions.
One of the benefits of Bitcoin is the transparency of transactions, Bitcoin transactions occur on a shared, decentralized ledger that is open to everyone on the network.
Transactions are checked and approved by over 50% of computers on the network. Imagine how this would reduce fraud if over 50% of employees in an organization were checking the transactions that occurred.
Now imagine if over 50% of the customers of a bank were checking that bank’s transactions. It would be very difficult to commit fraud with that level of oversight.
Once a transaction is entered onto the Bitcoin blockchain it can’t be altered or deleted. With existing systems, people committing fraud will attempt to cover up the audit trail by changing or deleting information. This is not possible with Bitcoin, an audit trail of Bitcoin transactions can be traced all the way to the very first block on the blockchain.
All transactions are in real-time with the status of any transaction able to be viewed on the Bitcoin blockchain. When you send a payment or bank transfer using existing methods, you don’t know if it’s been received and often you will have to follow up to confirm the payment was received.
With Bitcoin, when you send a transaction, you get a transaction reference, you can enter that transaction reference in a Bitcoin blockchain explorer and view the status in real-time.
You can see when it is received by the other Bitcoin address or if there is an issue with the transaction.
Currently, when performing a transaction, people place their trust in an intermediary to facilitate the transaction. With Bitcoin, this trust is placed in the Bitcoin network instead of an intermediary.
The Bitcoin network is decentralized with everyone connected to the network able to view all transactions that have occurred. Transactions can’t be altered or deleted so if a transaction occurs everyone can see the details of that transaction and the Bitcoin addresses involved.
Bitcoin allows for the removal of intermediaries while still retaining trust and security in the transaction process through decentralization and transparency.
Security is one of the key elements in the design of Bitcoin. There are several features of Bitcoin that provide a high level of security.
Cryptography is used to protect wallets, addresses, identities, and transactions. It is almost impossible to obtain someone’s private key to their Bitcoin wallet through existing hacking methods such as a brute force attack.
Note: A brute force attack is where a computer generates a large number of guesses at a password in a short period of time. Often this is done using common words, phrases, and numbers. E.g. yourname1, yourname2, childname1, childname2, petname1, petname2, etc.
The decentralized structure of the Bitcoin network means that in order to manipulate or control the system, a person would need to control over 50% of the computers on the network at the same time which is computationally unfeasible.
With existing centralized systems, a person only needs to obtain access to one centralized server in order to control the system.
While the security of the Bitcoin network is not perfect, it offers significant improvements over existing systems with a wide range of security features that are non-existent or not possible with existing centralized systems.