What is Bitcoin (BTC) ?

by in Bitcoin 101, Bitcoin For Beginners

What is Bitcoin (BTC) ?

The invention of the Bitcoin

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Everything started in 2008. An unknown man, who called himself Satoshi Nakamoto, decided to bring Nick Szabo’s idea about digital currencies back to life. He created Bitcoin, which became the most popular and valuable crypto coin. No one knows, who Satoshi Nakamoto is and if he is a programmer or a group of them. Many sources say that he left his Bitcoin project in 2010, but again no one knows if it’s true.

What is Bitcoin?

All we know that fiat money is artificially created value. Before that, people used to take something they need, giving something they already have. They just exchanged milk for millet, cotton for sugar, and so on. China changed the game. They invented coins. From that time many technological changes amused people: the discovery of the electricity, the invention of the car, the telephone, the Internet, and the Bitcoin.

Explaining simply, we can conclude that Bitcoin is an artificially made digital crypto coin that has its own cost. But what distinguishes Bitcoin from simple digital money? The main difference is Bitcoin's system. It's decentralized. It works based on the blockchain system, which lets Bitcoin have more freedom than digital money has. It means there’s no central block/man/point/algorithm… anything that can control Bitcoin.

Blockchain programming manages time and the number of coins that are produced. The system also tracks all the transactions that are made and authenticates all processes.

Nowadays, there are more than 17 million bitcoins in circulation. Like stock and gold prices are dictated by venturing on exchanges, Bitcoin’s price depends on bidding too.

How does Bitcoin work?

When you first hear anything about Bitcoin, you also learn about its mining. To understanding Bitcoin’s working process, we must start exploring it from the very beginning - mining.

The system of the blockchain validates all transactions, and if everything is correct, it adds a new block to the chain. Miners are the ones who make this happen. Miners are connected to the blockchain and are solving hard mathematical problems to verify transactions and let the system work properly. In the beginning, each regular PC in the world could handle those mathematical problems and each of us could be a miner (or maybe you were), but now these mathematical problems are so complicated that you must have appropriate technically equipped computers to cope with them. So, mining is the process when your computer runs a specific algorithm and solves mathematical problems in Bitcoin’s system.

Bitcoin’s system gives rewards to the most good-working miners. They get bitcoins for their excellent job. For now, every successfully made verification of the block is rewarded 12.5 bitcoins.

How can someone get a bitcoin?

One question that can occur is that “If I don’t have a special computer, how can I get a bitcoin?”. It’s more simple than mining. There are a countless amount of companies that exchange fiat money to bitcoin. It’s simple, like exchanging USD to GBP or EUR to MNT.

Is it legal to have Bitcoins?

Many of us have heard about issues that criminals have made their money transactions through Bitcoin. And you can ask yourself a question “If they are working with Bitcoin, is it legal to have some?”. Let’s learn this question in two parts.

First: Why do criminals use Bitcoin? It’s very simple. Each of us can create a Bitcoin address and make transactions without identifying ourselves. So, this is why they do this. They are being paid and no one can detect this.

Second: So if I own a Bitcoin, is it legal? Yes! (Of course, in case that you are not selling guns and making money through this blockchain). Most of the transactions, that are made through the Bitcoin system, are legal.

Why the government is not taking Bitcoin under control? I’m sure that every government in the world wanted to take cryptocurrencies under their control at least once. But they can’t. Because the blockchain is a decentralized system, the one thing that the government can do is just make using of it illegal. But this wouldn’t make any sense, because if, for example, the UK decides to make using Bitcoin illegal, the whole world would still have access to Bitcoin's system.

Where can I keep my Bitcoins?

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The place where a man can keep his Bitcoin is called a Bitcoin wallet. These wallets keep private keys and collections of bitcoin addresses. A bitcoin address is a string of 34 numbers and letters. It is called a hash. And the cryptographic hash with 64 letters and numbers, which proves that you are the one who owns this address, is called the private key. Bitcoin online wallets:

  • The web client is very suitable for beginners. Even that Bitcoin works without a third-party, sometimes it’s helpful for a beginner to rely on someone who already knows everything in the system. The web client is based on a third-party server, so it runs all transactions.
  • Full client - This is the opposite version of the Web client. It’s a standalone system, and you control all your transactions by yourself.
  • Lightweight client - This app is just in the middle. It has a standalone email system that stores your bitcoins, but it is also connected to a third-party server, which controls all the operations.

Bitcoin hard wallets are kind of Bitcoin storages that are not connected to a network.

How are transactions made?

Let’s imagine you are trying to buy a smartphone, and you can pay for it by Bitcoin. You already have a Bitcoin wallet. You just need to log into your wallet and simply transfer a Bitcoin. You will receive a QR code (bitcoin address) from a shop that sells smartphones, fill in the number of Bitcoins you want to send, and add a transaction.

Your request will be sent to miners. As soon as they received it, they would confirm it, and you will successfully send bitcoins to the shop and get your smartphone.

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What are the advantages of choosing Bitcoin?

You have freedom. You can store millions on your wallet, and you can buy anything anytime you want, no need to wait for the bank’s manageable but long-term processes to happen. You can do everything anonymously, without identifying yourself, even if you are transferring $1 000 000 or more. There’s a 2.5% fee for any transactions taken by regular banks. Bitcoin’s fee is significantly lower.

This is the point, where you learned all the essential things about Bitcoin, and you can make your conclusions. For me, it’s obvious that Bitcoin and other cryptocurrencies are the substitutions of all nowadays fiat currencies, and these changes will happen in the nearest future.