What is Bitcoin (BTC) and How Does It Work?
Bitcoin is simply a decentralized virtual currency that offers various benefits to those who use it. It is a completely digital form of money, created apparently by a mysterious person named Satoshi Nakamoto, that is revolutionizing the world. The currency is entirely digital, there are no paper bills like the 100 euro notes you have in your wallet. It’s like an online version of cash that you typically use to buy products and services without a physical receipt. This crypto is revolutionary.
Not many shops yet accept Bitcoin and some countries ban it completely. However, some companies buy BTC as an investment leveraging the current hype. In October two years ago, for example, PayPal announced that it would allow its customers to buy and sell Bitcoin. You can imagine what happened on social media.
Elon Musk, the richest man in the world, CEO of Tesla and recently owner of Twitter, has just written here that Bitcoin is a good thing. When the richest person in the world supports a virtual currency, it must be a big deal. Thanks to Elon Musk’s comments, the value of the crypto has skyrocketed. A single BTC went from being worth about 4,200 euros to over 32,000 euros!
As the topic of virtual currency has become a global interest, the Bank of Singapore has suggested that Bitcoin could replace gold as a store of value. However, others see the risks associated with it and for example, the head of the Bank of England Andrew Bailey, has warned about the unpredictability, volatility of BTC stating that the virtual currency makes him “very nervous”. Now you may be wondering what this currency really is and how it works? By reading, you will learn something useful and necessary to know.
How Does Bitcoin Work?
Each bitcoin is basically a purely virtual digital file that is stored in a Wallet application (digital wallet) on both smartphones and computers. You can send bitcoin, or perhaps fractions of it, to your mobile app, and then you can send Bitcoin to other people. Each transaction is recorded in a public ledger called the blockchain. Those who use it enjoy huge benefits. This revolutionary technology can be used in many sectors. The security of the blockchain makes traceability possible and prevents theft and fraud, preventing people, for example, from spending money they do not have. It also prevents other parties, such as banks, from canceling or reversing transactions.
How Do People Get Bitcoin?
There are three main ways to get bitcoin: you can buy them using real money, you can be paid for selling a product in BTC, you can create them yourself using a computer, and you can also become a bitcoin miner.
How Are New Bitcoins Created?
For the bitcoin system to work, people must allow their computers to process transactions for everyone. To do this, computers must be very powerful to process incredibly complex sums and for this they consume a lot of electricity. Miners are rewarded for their work with bitcoin currency. This is a good reason to install very powerful computers. This process is called mining and the number of miners is increasing. However, we may have reached the break-even point. The cost of energy, due to many geopolitical aspects, has skyrocketed and if you started mining now, it could take years before you get a single bitcoin. You could go bankrupt in a few months because to mine you could spend more money on electricity than BTC is worth.
Why do Bitcoins have value?
Although completely virtual, BTC has value because people are willing to exchange them for real goods and services, even paying with cash. There are many other things besides money that we consider valuable. For example, metals like gold, silver, and diamonds. Once upon a time, the Aztecs used cocoa beans as a form of currency.
Why do people want to own Bitcoin?
Anonymity and speed of transactions are probably the most appreciated strengths of cryptocurrencies. In fact, with due care, it is possible to spend BTC anonymously. Many other people like the fact that they are decentralized, meaning that Bitcoin is not controlled by the government or banks.
Although all transactions are publicly recorded, unless you disclose it, no one could know the coordinates of your account. In a Twitter chat in January 2021, Elon Musk said he was a big supporter of BTC. He even changed his Twitter bio to “#bitcoin”. In recent years, he has consistently shown his support for virtual currencies, and due to his wealth and popularity, he has influenced major movements in cryptocurrencies. Following Elon Musk’s actions, the currency’s value has grown exponentially.
Is Bitcoin safe?
It is very difficult to copy Bitcoins (like altcoins in general), create fake ones, or spend those that you do not own because every transaction is publicly recorded. However, like real money, it is possible to lose your wallet and lose your crypto forever. Hackers carry out major attacks, and there are several articles on attacks and subsequent thefts of websites that allow you to store your digital currencies remotely.
Since its creation in 2009, the value of Bitcoin has constantly fluctuated, and many people believe that due to this volatility, it is not safe enough to convert their ‘real’ money into Bitcoin. This concern was also expressed by the head of the Bank of England, Andrew Bailey, about two years ago. He stated that he was “very nervous” about people using Bitcoin for payments, emphasizing that investors should realize that its price is extremely volatile. Andrew Bailey meant that the value could, without any warning, decrease significantly at any time, and investors could lose a lot of money.
Many players all around the world decide to play with Bitcoin to exploit its enormous advantages. Find out what these are by clicking here.