What is Bitcoin? Do you know this term? If you are new to this ecosystem, then you must know what Bitcoin (BTC) is and how it works. It is not difficult to understand and you will know much more after reading this article. Bitcoin became the largest cryptocurrency and it is attracting a large number of companies.
Ruffer, the Investment Management Company, described Bitcoin as the following:
“We see this [Bitcoin] as a small but potent insurance policy against the continuing devaluation of the world’s major currencies.”
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Bitcoin, the Digital Currency
Bitcoin is a digital currency that was created by Satoshi Nakamoto, a person (or group of people) that we do not know and that has never been known. After the world financial crisis from 2007/8, this individual unveiled Bitcoin’s white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
Bitcoin allows individuals from all over the world with an internet connection to send, receive or store Bitcoins in their wallets. This is the first time that people are able to send value across borders without depending on centralized third-parties.
Bitcoin White Paper written by Satoshi Nakamoto reads as follows:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
This could be just one of the answers to the ‘What is Bitcoin?’ question. Nevertheless, it is not the only one.
That’s one of the most important things about Bitcoin. The payments are sent from one person to another one, without depending on a third party institution like a bank. That means that you are the real owner of your money. Nobody needs to accept the transaction, or move the money from one place to the other.
Of course, that means that you need to be very careful when using your BTC. There are no chargebacks if you made a mistake when sending them and take care of the private key of your bitcoin wallet. This is one of the most important things about this ‘What is Bitcoin’ post.
Another important thing to mention about this cryptocurrency is its limited supply. There are only 21 million BTC that will ever be created. This is the first digitally scarce asset in the world. Some analysts compare it to gold. Nonetheless, BTC has not only a limited supply, but it is also scarcer than gold itself. This is also one of the reasons why BTC works with miners.
If you already know what is Bitcoin, then you will definitely enjoy this guide. It will provide you with more knowledge about this virtual currency. Furthermore, you can also read it in order to refresh some terms or simply know what is Bitcoin.
What is Bitcoin Mining?
To understand what is Bitcoin, it is certainly important to know what Bitcoin mining is. When we send a transaction in BTC, it does not reach the other person immediately. Indeed, there is a process behind it.
As we mentioned before, Bitcoin is decentralized. There are no centralized authorities or third-parties controlling this. Thus, a decentralized network of miners is working in order to process all the transfers. Miners are now large companies that process difficult computational puzzles and confirm the validity of transactions.
This is a key part of how BTC works. In order to perform these hard formulas, Bitcoin miners require specialized hardware. This hardware is known as ASIC. These powerful computers allow miners to confirm transactions. That means that they need to verify the BTC that are being sent are valid (have never been spent before).
Bitcoin Mining Rig used to mine BTC and to illustrate this ‘What is Bitcoin’ guide
Thus, understanding what is Bitcoin mining would be definitely important to know more about this virtual currency. Miners get reward with BTC every time they find a block. Finding a block means that they were able to find the solution to a difficult puzzle containing 1 MB of transactions.
What is Bitcoin decentralized secret? This virtual currency works with miners and nodes. They are very important to answer the question to ‘What is Bitcoin.’ They allow the network to be totally decentralized. There is no third party controlling it.
Bitcoin Transactions
At the moment, the Bitcoin network is able to process 1 MB blocks every ten minutes. Every single time Bitcoin miners find a block, they receive 6.25 BTC. However, this is a changing value. Every four years, the new issuance of BTC gets reduced by 50%. This is a process known as halving event. The last halving event took place in May 2020 reducing the rewards for miners from 12.5 BTC to 6.25 BTC per block. It is worth mentioning that BTC miners get also rewarded with the fees paid by users.
When sending a BTC transaction, users will have to pay a small fee. The fee would be larger if the network is congested. Considering a block is processed every ten minutes, 1 MB of transfers can be processed. That means that the larger the number of users using BTC, the higher the fees.
Most of the Bitcoin miners are now located in China. This is why many users are worried about what could happen in the future. Nevertheless, considering every person in the world could run a Bitcoin node or become a miner, it is possible for the network to be protected.
At the moment, the Bitcoin network is the most secure in the world. According to Blockchain.com, the BTC hash rate has surpassed 142.7 EH/s. This makes 51% attacks almost impossible on the BTC network.
Bitcoin hash rate chart from Blockchain.com
The larger the number of miners, the larger the hash rate. Miners compete against each other to be able to find blocks and get the reward. With a BTC price of $30,000 a 6.25 issuance per block would be equal to $187,500.00 per block (every ten minutes). Furthermore, miners receive the fees paid by BTC users.
How to Buy Bitcoin?
It is not difficult to buy Bitcoin. There are different cryptocurrency exchanges that accept dollars, Euros or other currencies and allow you to purchase Bitcoin. Some people want to know about what is Bitcoin just to buy this virtual currency.
Most of the countries have their own cryptocurrency exchanges. You need to search for them. But there are some international ones that will allow you to buy and sell cryptocurrencies. Additionally, some of these crypto exchanges offer a platform for traders that want to invest in the market.
It is not so difficult to open an account. In general, you will have to provide your ID, Passport and/or another document that proves your identity. Once you have done all the possible steps, you will be able to buy with a credit card, debit card, wire transfer or the options available in that particular exchange.
One of the best exchanges to buy Bitcoin is Binance. You can buy Bitcoin in just a few steps using this platform. You only have to create an account in this platform and start using it. There are many exchanges in the market. You can use the platform that will offer you the services and features you are looking for.
Cryptocurrency Market
At the moment of writing this article, Bitcoin is the most important cryptocurrency. It has around 40% of the total cryptocurrency market and is being traded at $11.500 dollars (April 2018). There are other cryptocurrencies as well and they have been gaining attention during the last year.
However, things change on a regular basis. The market is volatile and investors know it. The virtual currency became very useful for individuals that want to trade. For example, 2017 was a very positive year for BTC. The largest cryptocurrency moved from $960 to almost $20,000.
Things changed in 2018. The market corrected, and this affected Bitcoin’s price. Furthermore, Initial Coin Offering tokens lost most of their value. Many of them disappeared. 2018 became then the year of the large correction for BTC. The virtual currency fell to $3,200 and remained close to this value for several months.
In 2019, things look already brighter for this virtual currency. The market turned positive moving from $3,400 to $13,750 at the end of June. Nevertheless, a new multi-month bear market pushed the digital asset to $3,800 with the COVID-19 crisis in March 2020.
Since then, Bitcoin entered a new and flourishing bull market. 2020 was a very positive year for BTC that ended the year close to $30,000. The future looks certainly bright for BTC and the entire crypto market. The main difference this time, at least until 2020, is that ICOs and smaller tokens (altcoins) do not seem to be playing the leading role as in 2017.
Bitcoin price chart until January 2021
Nobody knows what can happen in the future. Nevertheless, there are several companies that believe this cryptocurrency could continue growing. If that happens, it might surpass all the possible records and expectations. Some analysts consider that it is even possible for BTC to reach $100,000 and even more.
This is something only time will be able to tell. One thing is clear, large companies are starting to enter the market. This could create a large buying pressure for BTC. Considering its supply is limited, this could create bullish pressure.
When people didn’t know about this cryptocurrency, they were not searching for ‘What is Bitcoin.’ Things change now that its price is close to $30,000.
Final Words about What is Bitcoin
In this ‘What is Bitcoin’ guide, we have shared with you the most important things about this digital currency. Bitcoin is a new asset class that is offering users with the possibility to send and receive money. Moreover, BTC has also been in an unprecedented price expansion over the last decade.
It is clear that the answer to ‘What is Bitcoin?’ is not a clear one. There are more questions than certainties at this point. One thing is clear: Bitcoin could become digital gold.
Disclaimer
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