Back to top

Bitcoin: what is it?

Bitcoin basic information

Bitcoin essence

Bitcoin is the most popular decentralized digital currency in the world. Electronic payment system based on mathematical calculations, created by a hidden developer under the name Satoshi Nakamoto. He created it to allow people to make transactions bypassing various financial institutions, thereby avoiding high commissions and bureaucratic processes.

Bitcoin was created based on BlockChain technology. This technology allows you to distribute digital information, while limiting the ability to copy this data. BTC intentionally left open source, which allowed other developers to master and develop the idea of cryptocurrency.

Bitcoin is an unsupported currency, which is its main difference from dollars or euros. It is not tied to physically existing assets and exists only virtually. The cost of cryptocurrency depends on the trust in it to users and the demand for it. The payment system does not obey a single management apparatus.

The basic mechanisms of the work Blockchain and Bitcoin

In simple terms, the underlying Bitcoin technology of BlockChain is a chain of blocks that store data about previous «bricks». They are arranged in series, one above the other, and are inextricably linked with each other. Each block is sealed with a digital signature that is stored on the device that creates the chain. To fake even a minor transaction, you need to make changes to the entire chain of blocks, having received the keys to them. In addition, the database is constantly updated with all participants in the system (every 10 minutes), so it is extremely difficult to rotate the fraud unnoticed.

How does bitcoin work?

The underlying principle of Bitcoin is decentralization. The registry does not have one server, but is divided equally among all the participants in the system. All information from the database is completely open. Any Bitcoin user can view the details of each transaction made. Information will never be deleted, modified or closed. This ensures the transparency of the operations.

Speaking of security, thanks to sophisticated matching algorithms, all records that appear in the database are promptly synchronized with copies of the registry on the participants’ computers. To turn the fraudulent scheme, you will have to change the data of more than a million users around the world. Make it technologically impossible.

Baseline characteristics Bitcoin

As a means of payment, Bitcoin owns a number of features that distinguish it among the usual currencies and assets:

  • Anonymity of transactions. Digital wallets use pseudonyms instead of real usernames.
  • Decentralization. Unlike national currencies that are controlled by central banks and governments, Bitcoin does not have a central government.
  • Low commission. Using Bitcoin for their operations, the user will pay much less commission than if he had completed the transaction through a bank or other financial institutions.
  • Speed. Compared with the same bank transfers, which can take several business days, Bitcoin operations are almost instantaneous.
  • Ease. In order to purchase Bitcoin, you only need a digital wallet. After receiving your digital address, you can purchase bitcoin in the exchanger or on the cryptocurrency exchange.
  • Transparency and security. All sites that sign any transaction are available on the public network, and each system user has a cryptographic account (address) and a private key that signs any transaction.
  • Virtuality. The paradox is that physically bitcoin does not exist. There are only transaction records in the overall blockchain chain.

Where does bitcoin come from?

Bitcoin uses a common protocol called PoW (proof of work). This means that coins can only be created during the mining process. This process involves solving complex math problems to solve a block, which is then distributed across the blockchain chain. And if at the initial stages the mining process could be carried out using a conventional computer, now with the increasing complexity of mining, to solve a single unit requires incredibly powerful equipment and greater power consumption.

Bitcoin mining

A new bitcoin appears every 10 minutes regardless of the number of miners in the system. The one who gets the last unit of a cryptocurrency gets a reward — 12 coins. More than 3,600 bitcoins cannot be produced per day.

The Bitcoin code initially contains a limit on the number of coins — there can’t be more than 21 million. Thus, the cryptocurrency is protected from depreciation. No one in the world can simply print an arbitrary amount of funds without any control and put it on sale. A comparison with precious metals is appropriate: they, like Bitcoin, can only be mined or bought.

How to become a Bitcoin owner?

Immediately it is worth making a reservation that it is impossible to get Bitcoins for free. A few years ago it was possible to mine cryptocurrency on a simple personal computer, but today it is unrealistic. To become a digital «miner», you must purchase powerful computing equipment. The algorithm is constantly complicated, so computers require more and more resources.

You can connect to the mining process by joining a mining pool or cloud mining. It is the second option that deserves special attention of users who do not own serious computing power.

Investing in cloud mining cryptocurrency (cloud mining) is the most sensible step in preserving and enhancing your cryptocurrency assets at the moment. In a nutshell, this is simplified mining, which frees you from the cost of electricity, round-the-clock monitoring, software tuning and other difficulties associated with the classic mining option on your equipment. Recently, services such as Genesis Mining have been popular.

Another option for getting bitcoins is cryptocurrency taps. Previously, it was a fairly simple quick way to get a small amount of bitcoins. You need to follow the links of commercials and banners. For this you get a tiny part of the coin. Now this method is recognized as ineffective.

Well, the easiest way to become a happy owner of Bitcoin — just buy it. Here at your service a huge variety of various exchangers. Having chosen the service that suits you, you can exchange real money for digital money at the existing rate. As soon as the operation is completed, the funds will go to your wallet. However, beware of fraud sites that sell cryptocurrency. It is not uncommon for users to sell fake coins. You can detect a fake only when you try to conduct a transaction with it. Study the reputation of the portal before transferring money to it.