Bitcoin is the king of cryptocurrencies and if you didn’t live under a rock, I’m sure you heard about it at least in December 2017, when its value peaked at 19,000 USD. That’s right, a virtual currency is valued at almost $20k. Evidently, this drawn a lot of media attention making the cryptocurrency very popular among a lot of people. Now, everybody knows about Bitcoin but do we know what is Bitcoin?
What is Bitcoin?
Bitcoin is the first cryptocurrency that gained a bit of a traction and adoption in the crypto world. It was released in 2009 as an open-source software digital currency by Satoshi Nakamoto, a very mysterious figure or some say, a group of people, that remained anonymous to this day. There are many speculations surrounding this figure but for the sake of this guide, we’ll stay out of it. So, Bitcoin is a digital currency that uses a decentralized platform, the blockchain, to record and complete transactions. There is no institution or organization that controls Bitcoin, everything is decentralized and it’s working similar to a vetting system.
The blockchain is a digital ledger that’s being used to keep the history of all Bitcoin transactions, it monitors and records them. The blockchain accountants, also knows as the miners, are the poeple who validate the transactions using specialized hardware and software. How that works is pretty simple to understand: Mary logs into her Bitcoin wallet, copies Alex’s wallet address (similar to an IP address), sends 1 bitcoin to Alex. Mary signs the transactions (which is done automatically by the wallet) and sends it to the blockchain where it’s added to a block. The miners start validating the block and all the transactions in it and once they do that, add the block to the chain, the blockchain. Doe the the complicated nature of the blockchain, nobody can fake or steal any Bitcoins transactions, everything is ultra secure.
As you can see, the core fundamentals of Bitcoin are pretty simple to understand, there are no 3rd parties involved, everything is at max security and the transfers take a couple of minutes. Now you probably understand why the banking system is getting more and more afraid of Bitcoin, it eliminates them entirely, giving the power back to the people behind the transactions.
How many Bitcoins are there?
You have to understand that Bitcoin doesn’t have an infinite number of coins, their total supply is 21 million with about 17 million Bitcoins circulating at the moment of this writing. The estimates point that in 2140, the last Bitcoin will be mined and there won’t be any more extra from that point. This low amount makes Bitcoin even more valuable, somewhat compared to diamonds in the real world. However, using that comparison, Bitcoin is divisible in units called satoshies. A satoshi is 0.00000001 Bitcoin and payments or conversions are done using this measurement. So basically, if you want to buy a cup of coffee some day using Bitcoin, you will probably pay a similar amount such as 0.00000012 BTC (depending on BTC’s worth at that point).
There are different wallets that you can store your Bitcoin but only 3 general types:
- hardware wallets (the most secure)
- software wallets
- paper wallets
To keep it short, hardware wallets are physical devices that hold your private keys for you behind a secure system, a software wallet is a program or app that does the same thing but keeps your keys locally on your computer and paper wallets are exactly how that sound, you write down or print your keys on a piece of paper and use those keys to access your wallet. If you want to learn more, we found a very good Bitcoin Wallets guide so you can see exactly what’s worth getting depending on your preference.
So, now that you’ve learned a bit about Bitcoin and how it works, you probably understand that this may someday disrupt the whole financial system and produce a revolution in that sector. While it still has ways to go, it’s important to understand its importance and future possibilities.