I am an accounting student and I recently read about bitcoins, I was wondering if anybody could clear up my questions from my basic understanding of the bitcoin system.
Since Bitcoins on a whole, derive its uniqueness from the system of maintenance of a public ledger and an important part of this, are the miners, who are provided an incentive in bitcoins for for their hash creation. The cost of hashing and recording it in the public ledger is technically, the bit coins paid to the miner. My questions are
- Who bears the burden of the cost? Is it the user or is it the network?
- If its borne by the network, wouldn't this cause an increase in circulation of bitcoins in a network and lead to reduction in their value making them unstable?
- If the this cost is borne by the user, then how does it make it an alternative to native banking transaction cost?
2) Based on what I have read online, so far, the circulation of bitcoins is capped of to a certain limit to prevent deflation but my question is
- If the mining of bitcoins also lead to circulation increase, how can the system handle the volume of transaction relating to a global economy? How would this effect the public book keeping system and the miners ?
Can somebody please help me understand this ?