The technological development of recent years has encouraged the creation of several new means of payment. Bitcoin is the flagship invention of this new generation of cryptocurrencies which aims to be spontaneous, fluid and universal. Who created bitcoin? How does it work ? What are the pros and cons? Here is a close-up on bitcoin, let yourself be guided to learn more in the field of cryptocurrencies.
Definition of Bitcoin, a revolutionary cryptocurrency
Literally, bitcoin is the combination of two anglicisms : Bit (binary unit) and coin.
It is a peer-to-peer electronic payment method belonging to the cryptocurrency category. It is intended for exclusive use on the internet and is completely independent, in particular of states and banks. The process of generating this virtual currency is managed by a decentralized computer network. In other words, there is no bank or centralized body that controls the issuance and mining of bitcoins.
What about blockchain ?
Blockchain is a highly secure system that stores and distributes information to a set of computers located in separate locations. It was used by the creators of bitcoin to help secure, encrypt and record transactions. All other cryptocurrencies are also endorsed by blockchain technology.
Note: Unicode (the international standard for character encoding) has recognized bitcoin since 2015 under the stock symbols BTC and XBT.
The idea of creating a virtual electronic money dates back to the 90s like the web. At the time, the project could not be implemented because of a problem of double spending that had to be solved. An electronic amount should be able to be used to make only one transaction at a time.
In 1998, two concepts of decentralized digital currencies were introduced. Although they were never officially launched, everything suggests that these two projects played a large part in the advent of cryptocurrencies.
Here are some key dates in the popularization process of bitcoin:
- January 2009: the mining of the very first bitcoins by Satoshi Nakamoto (a bitcoin equivalent to around 0.001 dollar) is done;
- March 2010: the first cryptocurrency exchange on BitcoinMarket was made;
- May 2010: the first purchase made by bitcoin was made (2 pizzas purchased for 10,000 BTC);
- February 2011: it acquires the same value as the dollar;
- September 2012: the bitcoin foundation whose mission is to standardize and promote bitcoin was created.
- December 2017: Bitcoin reached a record peak of $ 20,000 before falling back down during the day on December 17.
Today, the price of bitcoin is currently (end of June 2019) at just under $ 8,000 after its value has soared (bitcoin is worth 3 times more than at least in March 2019).
Note also that the name Satoshi Nakamoto mentioned above is only a nickname. So it could be an independent developer or a group of developers who collaborated on the creation of bitcoin.
How bitcoin transactions work
To better understand the concept of decentralization advocated by this virtual currency, it is necessary to understand how the different transactions are carried out.
Suppose you want to transfer an amount M to your friend X for example. You will use your bitcoin wallet to order this transaction by entering your friend’s address. Then, a computerized process will check the transaction, add it to the blockchain and then validate it. Note that the validation of a bitcoin exchange or transfer is only effective after 51% of the computers making up the blockchain have approved it. At the end of the process, the amount is deposited in your friend X’s wallet for a proportional fee that is chargeable to you.
How to get started with bitcoin and where to buy bitcoins ?
Bitcoin is not restrictive. Anyone passionate about cryptocurrencies can get started. To achieve this, it is important to have a clear idea of certain important points before starting.
The first step is choosing a portfolio (commonly known as a wallet). This is essential if you wish to be able to carry out transactions (sending, receiving, purchasing). To this end, several popular wallets such as eToro or Coinbase offer their services. They also generally offer other cryptocurrencies like Ethereum, Bitcoin Cash or Litecoin.
The second point concerns the conversion of bitcoins into current currency. Many platforms offer this service and allow users to fund their bitcoin wallets from conventional currency. A little research on the internet will allow you to identify a platform that will be suitable for you.
In terms of usage, more and more online trading services are accepting bitcoin or ethereum as a form of payment. Spending your virtual currency should therefore not be a problem.
The advantages of Bitcoin
It has many advantages relating to its apparent practicality. Here are the main advantages of using it as a means of payment.
Spontaneity of transactions
Bitcoin transactions are decentralized and cover the whole globe. As soon as an order is issued on the blockchain and is verified, the transaction is concluded instantly. In concrete terms, it takes a maximum of 10 minutes to send it. This is a remarkable time saver compared to the slowness of the banking system, especially for international money transfers.
There are no transaction fees involved in trading this cryptocurrency. The system is almost free, and the only fees charged are to compensate miners who have made available their processor power to complete the exchange. In addition, there is no maximum limit for sending bitcoins.
Highly secure transactions
Blockchain is at the top of the ladder when it comes to security. The encryption system and non-centralized validation significantly reduce the risk of fraud or scams.
The disadvantages of Bitcoin
It has drawbacks related to its characteristics and its mining process.
Mining requires a large amount of electricity. Most of the time, this electricity comes from a highly polluting energy source, namely coal. Bitcoin is therefore indirectly responsible for environmental pollution to some extent.
The technical limits of bitcoin
Despite having come a long way since its creation, the value of bitcoin is nonetheless unstable. Its value can therefore drop at any time. In addition, the open source nature of this cryptocurrency makes it possible to clone endlessly. This could be a problem once the network is full.
Like all other cryptocurrencies, it is not legally regulated. Users are therefore not immune to hijacking, scams, cryptojacking or hacking. In addition, due to its anonymous nature, it can be used for illicit purposes without the possibility of prosecution.
In conclusion, remember that bitcoin is a blockchain-based cryptocurrency that has many advantages. It is a notable invention that could in the long term be a sustainable alternative to the banking system. Until the future virtual currency created by Facebook, Libra, bitcoin undoubtedly remains the most used cryptographic currency.