The use of electronic currencies has increased more and more in recent years. Many economic players are now getting used to receiving and spending cryptocurrency such as Bitcoin. What is bitcoin? How to mine bitcoin? How to use it as the currency of the future? Here is everything you need to know about the most popular virtual currency.
1- Definition and operation of bitcoin
Bitcoin is electronic money. It works on the basis of exchange of units through a computer network. The most interesting thing about this exchange system is that it does not have a central point of control of exchange flows as is the case with conventional currencies. As a reminder, the central structures that regulate traditional currencies have the essential role of controlling the circulation of these physical currencies (paper or fiduciary).
For their part, theareDigital currencies like bitcoin operate on the basis of an interconnected global chain with a large number of nodes. Thus, within each network there are ultra-powerful machines comparable to sophisticated computers that calculate, process and store all the bitcoin transactions carried out.
These recordings of transaction data are made possible thanks to the implementation of a famous technology called “blockchain”. Concretely, this blockchain technology ensures the security of transactions carried out with bitcoin. Once started, it becomes particularly difficult for anyone to stop or interfere with transactions. This is a means that considerably limits the risk of piracy. In addition, it is possible to trace each transaction carried out with Bitcoin and it is almost impossible to modify the history of transactions.
2- Where does bitcoin come from?
Bitcoin was first made public by a Japanese man known as Satoshi Nakamoto. No one knows his true identity to this day. Satoshi released bitcoin in 2008 in idea form and on a digital mailing list for IT professionals. The latter had to study it thanks to a secure communication system called cryptography.
3- Is bitcoin still current and where can we use it?
For more than ten years, bitcoin has been used and is the subject of very active exchanges on all stock markets. This allows cryptocurrency enthusiasts to exchange it for physical currency such as the euro, dollar, pound sterling or franc.
If you want to use bitcoin, you need to start by creating an e-wallet. Typically, this can be done online on a website or mobile application or mobile hardware device. The role of the wallet is to secure and protect the secrets and codes used to authorize the movement of currency. The wallet also has the ability to govern your passwords (private key).
The private key is unique and consists of several automatically generated English words, the loss of which systematically leads to the disappearance of your assets. With such a wallet, you have access to several “addresses” comparable to bank account numbers. It is precisely these addresses that are used to facilitate the reception of bitcoins.
4- Why prefer bitcoin to the usual currencies?
You have to look at how money works to answer this question. Basically, when money is created, it reduces the value of the existing one. This affects the purchasing power of individuals. Bitcoin works differently.
The bitcoin supply is limited and the production of bitcoin cannot be unlimited. So far, no more than 21 million bitcoins have been created and each bitcoin is itself divisible into 100 million units called satoshis. All this helps to avoid interference between the value of bitcoin and that of normal currencies.
5- What is bitcoin mining?
We often hear about bitcoin mining, but few people really know what it is. It is the process of adding new blocks of transactions to the history of transactions made on the blockchain. Moreover, there is currently a world-class competition called the mining race. Very few people participate in it to earn the right to add a new block to the blockchain. Usually, the people who participate have enough means, because the competition requires the purchase of specialized mining equipment, expensive and greedy in electricity. Winners are entitled to: a reward equivalent to 12.5 BTC for editing each block and a bitcoin transaction fee.
However, the competition is of a major difficulty and requires very specialized skills in mathematics. Additionally, to reduce the issuance of new blocks, the level of difficulty increases as the number of miners involved increases. We also note that the block reward is also halved every four years. This avoids the rapid issuance of new bitcoins, but also makes their production much more expensive.
6- Are crypto-currencies like bitcoin reliable?
The issue of reliability is a major concern as in any area where we observe the emergence of new technologies. There are indeed cryptocurrencies that are very reliable and others that are less so. As for bitcoin, it is a fairly reliable cryptocurrency that has proven itself for many years.
There are ways to tell real cryptocurrencies from fake ones. For example, you have the possibility to analyze the development of cryptocurrency in the market. You have chart analysis and fundamental analysis to help you with this.
7- Can you get rich with bitcoin?
Classified as a high-risk asset, bitcoin is a speculative and highly volatile cryptocurrency. This e-money goes through several cycles, including boom and bust cycles. This means that, depending on when you acquire it, it can make you very rich all at once or ruin you.
Initially, bitcoin was worth 1 dollar. Thanks to the craze it generated among the public, it quickly increased in value reaching a peak of around twenty thousand dollars in 2017. It then dropped to around $3,000 and then managed to stay around 8 000 dollars later.
In fact, cryptocurrencies like bitcoin work the same way as stocks. Their value largely depends on what others are willing to pay for them.
8- Can the value of bitcoin exceed that of physical currencies?
It is possible that the value of bitcoin exceeds that of physical currencies and moreover, it is presently the case. The current value of bitcoin is estimated at more than 29,000 US dollars.
Cryptocurrencies, also called stable currencies, are very popular and their current value is already approaching that of classic currencies such as the US dollar, the euro, etc.