Bitcoin, explained in simple terms

Introduction: What is Bitcoin?

For starters, bitcoin is a digital currency that uses encryption to make transactions secure and transparent.

Moreover, its value is determined solely by supply and demand.

It is the first decentralized digital currency, which means that it does not have a central bank or a government.

Currently, the use of cryptocurrencies has increased exponentially in recent years (with more than 18 million bitcoins in circulation) and they are increasingly accepted, it is the most popular virtual currency in the world.

Bitcoins are not bills that are printed by a central bank, but produced by the gradual process known as mining, in which computational power is used to solve complex mathematical equations that verify transactions and ensure the security of your blockchain.

In recent years, its value has been increasing rapidly, and there are many people who believe that this could be the future of money.

In simple words, it is a rapidly growing digital currency system that can be used to make payments around the world, just like ordinary money.

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What other features do they contain?

Initially, it is open source, which means that anyone can get involved in its development and contribute to its future.

In addition, the Bitcoin network contains three essential features:

First, a record of all transactions, known as a blockchain.
Second, a decentralized network of miners who maintain it; and
Third, cryptographic proof that gives value to each transaction.

Some supporters of the protocol argue that the best way to increase financial stability is to allow the free market to decide how much capital must be dedicated for transactions to be reliable.

As we have already seen, this is a purely digital currency and has no physical representation.

Therefore, it makes it popular among libertarians and people who value freedom over regulation.

Finally, the protocol specifies that there will only be 21 million in circulation, which makes this cryptocurrency scarce.

How does Bitcoin work?

In simple words, it is a cryptocurrency that uses cryptography to regulate the creation of new coins and verify transactions, which was created to be a decentralized peer-to-peer payment network.

The Bitcoin network is made up of nodes that are connected to each other and use cryptography to authenticate transactions.

As a mode of definition, a node in the network is identified with a unique address that can be public or private.

This currency uses blocks as its main data structure and each block has an information header containing the hash of the previous block and the timestamp.

This is why the blocks also contain one or more transactions, which include the sender’s address, the recipient’s address, and the amount transferred.

So, the main way to get bitcoins is by participating in mining on your network. There are currentlyaround 19 million bitcoins issued and in circulation.

Where do I get them?

For their use, one of the ways to buy them is using exchanges like Coinbase or Binance.

Since they operate on a decentralized peer-to-peer network, this means that there are no centralized servers or checkpoints that can be hacked or removed.

Instead, Bitcoin transactions occur between users directly with the help of cryptography.

The blockchain technology they use is how they avoid double spending, where a person spends money more than once, and makes sure transactions are permanent and secure.

Thus, at present, the value has increased rapidly in recent years. In 2017, its value in UDS exceeded the barrier of 10,000UDS for the first time in its history.

However, despite such rapid growth, there is still a lack of public understanding about what exactly it is and how it works.

How are bitcoins stored?

Bitcoins are stored in a digital wallet, which can be a software or hardware wallet.

By definition, a wallet is an application that is accessed from your computer, mobile device or tablet and stores the public and private keys that are used to access Bitcoin addresses and sign transactions.

There are two types of wallets: hot and cold.

First of all, the hot wallet is the one that is connected to the Internet and is used for day-to-day transactions.
Secondly, cold wallets are offline, protected by a passphrase, and cannot be connected to the Internet.

The difference between these two types of storage is how secure they are against hackers and whether they are online or offline.

In hot wallets, private keys can be easily stolen or hacked if they are on an insecure device or network.
In cold wallets they store their private keys offline in an encrypted file that is not connected to any network.

So, which one to choose?

Bitcoin wallets are, by their very nature, a compromise between convenience and security.

For example, you can use an online wallet that can be accessed from multiple locations at once but is vulnerable to hacking.

Instead, you can choose to use a cold wallet that requires you to download the entire blockchain before you can send or receive payments, making it more secure.

The wallet Blockchain.com is the most popular wallet for Storing Bitcoins, it comes with many convenient features as it is open source, and its code can be found on GitHub. In addition, it has received praise for its security and convenience as it includes 2FA for better protection against hackers.

How to buy them?

It is known that buying bitcoins is a process that requires some knowledge and effort.

The first step in buying bitcoins is to set up an account on a Bitcoin exchange.

Once you have an account, you can transfer money to your account to buy bitcoins.

Bitcoin exchanges are online platforms where people can buy and sell Bitcoins for other currencies such as US dollars or euros.

It is known that the most popular exchanges are: Coinbase, Binance, Bitstamp, Kraken, Gemini.

Therefore, you must choose between one of them and go to the website of your selected exchange, look for the «Register» button and click there, fill in your personal information, accept their terms and create an account.

In addition, you will need to provide certain personal information such as name, email address, and password.

Once your account is created, you can deposit money into your account by transferring funds from a bank account.

What does this exchange provide me in my wallet?

The Bitcoin exchange will provide you with a unique deposit address where you need to send the money.

Once the fees charged by the exchange have been paid, they will send the BTC to your wallet or you can leave them in the internal wallet of the exchange’s platform.

Since exchanges offer a wide range of payment methods, including bank transfers, credit cards, debit cards, and bank transfers, some people may be wary of using an online exchange to buy bitcoins, as there is an increased risk of fraud.

You can also buy bitcoins with cash at specific bitcoin ATMs or buy them from a friend if you’re willing to sell them to them.

There are many reasons why people want to buy bitcoins, such as investing in the future of cryptocurrencies or for trading purposes.

What are the benefits of using Bitcoins as a digital currency?

Bitcoins have been gaining popularity in recent years because they are a digital currency that is not controlled by any government and can be defined as a peer-to-peer online currency.

This is why the benefits of using bitcoins as a digital currency include low transaction fees, increased anonymity, and no limits on the amount of money you can use.

However, the Achilles’ heel of bitcoins is that companies do usually not accept them.

You can use them on online marketplaces like Ebay, Craigslist and any other website where the market decides whether the currency will be accepted or not and can be used to buy all sorts of things, from technology to cars to food.

In addition, bitcoins can also be used as currency in places like India and China, where the government does not control the monetary system.

The current state of its adoption is mixtor, on the one hand, there are many merchants who accept it.

On the other hand, many people have not yet heard of it.

Although this coin has been around for a while, now many people are just beginning to learn more about it.

There are many ways to use it and the range is wide.

While there are some people who use it as a tool for speculation, others see it as an opportunity to change their financial situation and use bitcoin in their day to day.