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Bitcoin, what is it?

Why don’t we talk a little bit about cryptocurrency on ABC Argent? This is a fairly new topic that certainly arouses your curiosity. Some are afraid of him, others are fascinated. But above all, without necessarily falling into the realm of emotion, there is growing interest. And they are right! So, to start a series of articles on cryptocurrencies, let’s first talk about the most popular: bitcoin. What is this ? How it works ? Why should you care? Here are the answers to your questions about bitcoin.

Bitcoin, this cryptocurrency born in 2009

The first cryptocurrency projects appeared in 1989, but the first attempt was successful, and what a success! – is bitcoin, created in 2009 by Satoshi Nakamoto. Behind this pseudonym lies one or more developers whose identities and even their supposed Japanese nationality remain uncertain.

The concept of cryptocurrency

Therefore, Bitcoin is a cryptocurrency, the first in the family. But then, what is a cryptocurrency?

Like any currency, it is an instrument used to represent and exchange value. But unlike traditional currencies, it is not issued by a central bank but by a peer-to-peer computer system. In addition, cryptocurrencies only exist digitally.

All transactions are logged anonymously (or rather aliased) and can be searched in a secure log, incorruptible: the blockchain. It is also because this large record is fully encrypted that we speak of cryptocurrency.

In short, bitcoin and all other cryptocurrencies are alternatives to both traditional currencies and means of payment.

The characteristics of bitcoin

Bitcoin is not only the oldest cryptocurrency, it is also the most popular. Indeed, this cryptocurrency has made its way into the global financial system demonstrating its reliability both as a payment method and as an investment vehicle. It is no coincidence that bitcoin is the heaviest cryptocurrency today, with a total capitalization of about 850 billion euros.

Bitcoin, of course, has its own system, called Bitcoin (capitalized), with its own software, its own money-making protocol, its own blockchain, and so on. This whole system is public and transparent, everyone can study it … as long as it’s good with computers, though. In any case, this results in a collective and automatic management of the system.

In addition, we already know in advance the speed at which bitcoins will be created. Every year there will be less issuance of new bitcoins, and this creative process will stop when 21 million units have been issued. Some estimate that we will reach the year 2140 …

Finally, do you know that when you split bitcoin, you don’t get pennies like most currencies? Bitcoin, abbreviated BTC or XBT in the markets, is divided into 100 million satoshis : 1 satoshi = 0.00000001 bitcoins.

What is bitcoin for?

For a little over a year after its creation, bitcoin had very little use and its value was almost nil. In the spring of 2010, bitcoin started trading at $ 0.03. 3 months later, its price in dollars is multiplied by 30.

For 4 years, bitcoin has been attracting attention because it is mainly used for transactions related to criminal activities. But after the FBI shut down Silk Road, a veritable black market in the dark, Illegal activity is now a small part of the bitcoin trade.

Therefore, Bitcoin is being used more and more means of payment, mainly in e-commerce. Transaction fees are the responsibility of the sender in bitcoin and fluctuate depending on the degree of network saturation. These are usually as low as a few tens of cents.

Another use of bitcoin is financial investment. It is often a matter of speculating, of playing with the high volatility of its price. But some are also beginning to consider it a safe haven in the same way as gold, especially in times of crisis like the one we are currently experiencing.

Be aware of the risks associated with bitcoin

You already understand that bitcoin has many advantages : transactions between anyone in the world, without an intermediary, without an amount limit and with low commissions, anonymity, etc. But you also need to be aware of the disadvantages of protecting yourself from the risks.

In addition to the fact that Bitcoin is experimenting periods of very high volatility, with significant price variations in a few hours sometimes, the absence of an intermediary means that you can only sell your bitcoins if someone wants to buy them. It is true that bitcoin has become very popular, but the probability of a collapse will never be zero. What if one day no one else wanted to buy it?

The operation of Bitcoin is certainly transparent, but it takes a fairly advanced computer knowledge to explore it and know how it works. Too, it is better to be aware of everything related to computer security. In fact, if you are hacked or lose the private key that identifies your bitcoin account, you lose everything! Therefore, it is advisable to make copies in various secure media, but not too much so as not to increase the risk of someone with malicious intent getting into their hands.

And then, like other cryptocurrencies, bitcoin does not yet benefit from a well-defined legal framework. Therefore, any legal action is delicate and the result is very unpredictable.

Here it is, now you know the basics of bitcoin. In future articles on ABC Silver, you can read practical and detailed information, such as how to buy, secure, or even extract bitcoins and other cryptocurrencies. So see you soon!

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