Lately on Comparic there is more and more news from the Bitcoin world. This market is exploding, BTC is a magnet for a lot of investors, who have no trading experience, and what’s more, it is a real revolution in the payment system.
What is Bitcoin?
Because not every of our readers are familiar with the topic of cryptocurrencies – how to mine them, how are they valued and how to store them – we decided to create an article answering one basic question: What is Bitcoin (BTC) anyway?
What influences Bitcoin value?
BTC is based on open software of peer-to-peer type (computer network communication system, which can connect machines from all over the world, giving them the same permission level), thanks to which virtual currency can be transferred anywhere in the world in a matter of just few seconds. Coins don’t have physical form, they are not objects – it is more like the code lines. Every single BTC has its own, unique code. This is the concept hardest to understand – how the Bitcoin can have a value, if they are not physical money, just “made up” one? The answer is simple – people decide about Bitcoin value. It is a kind of unwritten contract, in which we assume, that BTC has a value transferable to physical money – if virtual currency is popular, its value will be getting higher.
As it turns out, it is not so detached of reality as you can assume. Remember that US dollar was based on gold until 1971. Currently one-dollar bill has a value of 1 USD because we agreed for that – not because it is secured by precious metal. Whole modern world uses virtual currency right now – bank transfers, card payments, Internet shopping etc.
What does it mean for the Bitcoin itself? If its value is based on the people using it – just like in case of real money – it can be a full-fledge payment method.
How are the Bitcoins created?
Bitcoins are generated by computing power of computers. In the initial assumptions, everyone was able to generate BTC on their own machines. However, the pool of coins which can be generated that way (mined) is limited, with every single BTC going into circulation, you need more time and stronger computer to mine another virtual coin. Because of that all over the world there are powerful Bitcoin “mines” being created, the consist of thousands of processors, graphic cards and other components. In practice, it means that average user has no longer the option to dig virtual coins itself. They only can buy them from others.
Each mined BTC goes to so called blockchain – data archive, where there are being stored information about every single code line of every coin and all transaction made. These transactions are encrypted with complex and complicated tools. Thanks to that we are sure, that specific BTC can belong to one and only person at the same time. It is a guarantee that if we own the coin, then no one in the world can have it in his wallet – unless we send it to him or we will be victims of hacker’s attack.
How can I get BTC and where is it stored?
To buy some Bitcoins first you have to configure your wallet. This is like an app, which you have on your phone/computer, created only for you, giving you a possibility to manage BTC.
There are many types of wallets and each of them has its pros and cons. Some people bet on traditional approach and they write code lines on the pieces of paper. Thanks to that they have 100% certainty that no one will be able to steal them. It is really annoying during the transactions, so the most popular are desktop wallets – we download it on our computer/phone and use it to manage our BTC.
All right, where can we buy Bitcoins? Bitcoin is not regulated and is decentralized – there are hundreds smaller and bigger BTC exchanges all over the world, you can use normal money to buy it there. When you own at least one BTC, you can pay with it for services or treat it as an investment.
Treat BTC like real money
You should treat virtual coins the same as normal money – first of all in the area of wallet security and your deposits. You should not make transactions with suspect people or untrusted exchanges. When you make your transaction, and send someone your coin with its code, you cannot reverse it.
Bitcoin market is still really new, in addition people without investing experience are often interested in it. A lot of fraudsters try to use it and they are looking for naïve market participants.
Why is it worth to use Bitcoin?
BTC lets us move any amount of money in real time and with small, almost zero fees. Transfer BTC worth of thousands of dollars and pay for it less than a buck. Transfers are totally secured and safe. In case we would like t to do similar transfer with traditional banks, it would take at least one working day and also we could be charged about 1-3% of the transfer value. Bitcoins let us avoid these things. Bitcoin is totally decentralized – no matter in which country you are and where you want to send money to, BTC transaction will be executed in a flash.
Do you know what is Bitcoin already?
We hope that this short article helped you understand better basic concept of Bitcoin. Like in any new system, it requires getting your own experience and observations to get more knowledge. Today we wanted to bring the BTC closer – it has an ambition to become money of the future.