Bitcoin is a type of cryptocurrency also known as digital currency. There are several types, and they can be used as a medium of exchange or as a store of value. It should be noted that digital currencies do not have a physical existence, which is precisely why they are digital. Bitcoin is therefore not controlled by governments. In comparison, the euro or the dollar can be devalued or controlled by the state agencies in charge. On the other hand, Bitcoin remains a virtual currency whose price is still in flux.
When was Bitcoin created?
It can be said that Bitcoin (BTC) is the origin and maximum representative of cryptocurrencies, with open source protocol and peer-to-peer networks. It was born due to Satoshi Nakamoto’s (so far unknown) article, published in 2008. At the beginning of its development, only a few tech geeks knew about it, and it was considered almost useless and worthless.
However, its value has reached figures never imagined for this type of asset. This is the foundation stone needed in order to understand how cryptocurrencies are born. Although the history of cryptocurrencies began in 2008, the first Bitcoin or cryptocurrency that was issued saw the light on January 3, 2009, at 18:15 hours, as part of a block of 50 BTC called genesis.
Why was Bitcoin created?
The history of global finance is littered with crises, most recently in 2008. It emerged unexpectedly and did more damage than any other crisis, bankrupting thousands of companies. Above all, it exposed the shortcomings of traditional currencies, which are totally dependent on an ecosystem considered obsolete. As a response to this crisis, Bitcoin was created.
Being different from traditional currencies, Bitcoin appears as an alternative to traditional currencies that are part of the same ecosystem. As a virtual currency, Bitcoin contrasts with these currencies. It can be purchased online with considerably lower transaction fees than regular currencies. Like most cryptocurrencies, it operates in a particular ecosystem, does not depend on any financial institution, and has no physical backing.
Where did Bitcoin come from?
At this point, no one seems to be aware of Bitcoin’s true inventor’s identity. He calls himself Satoshi Nakamoto, and it was he who inaugurated the history of the cryptocurrency by reserving the domain name Bitcoin.org on August 19, 2008. This developer, who regularly participated in some cryptographic mailing lists, never gave his real identity.
On January 9, 2009, Satoshi announced the release of version 0.1 of the Bitcoin software. He sent the first transaction three days later to one of his acquaintances, a crypto-savvy developer named Hal Finney. On October 5 of that year, the first Bitcoin dollar exchange rate was published, placing the value of Bitcoin at about one-thousandth of a dollar.
What are the uses of Bitcoin?
In addition to investing in cryptocurrencies to increase their value and get an economic return in the future, cryptocurrencies allow you to perform operations and transactions like normal money, as long as the product, service, or platform accepts them as a means of payment. In certain cases, users use them to make quick transfers without paying transaction fees. There are currently many products that can be purchased with bitcoins, from homes in certain parts of the world, from electronic devices and video games and entertainment to traveling around the world and enjoying free time.
How does Bitcoin work?
The virtual currency is stored in a digital wallet on a mobile, tablet, or computer. It contains a code and private keys that the owner holds. The owner can then send or receive bitcoins from other people or from companies that accept this payment model. Bitcoin is a digital currency that does not exist in physical form (coins or bills). This cryptocurrency is not recognized by states and global financial structures. It is therefore independent of banking systems and its value is generally speculative.
The operation of Bitcoin is based on three principles:
· The wallet and the Bitcoin address,
· The decentralized blockchain network,
· The mining (processing) system.
In order to guarantee the traceability and reliability of transactions through Bitcoin, it must follow a particular protocol called Blockchain. The operation of Bitcoin relies on a network of decentralized computers that perform the same role as banks, i.e. to verify each transaction between two parties. Each verified transaction represents a block, and all the blocks are gathered in a single register to form a chain, and it is the set of chains that represents the Blockchain. The integrity and the functioning of the Blockchain is ensured by cryptographic equations, hence the name of cryptocurrency.
Advantages of Bitcoin
Bitcoin is far from being an alternative to the fiat currency and electronic transaction systems that currently exist, but it does offer many benefits to its users:
This is the main reason why Bitcoin has remained controversial since its inception, but it really does have the potential for high returns for investors who use it on various trading platforms. At the end of 2017, the price of a single Bitcoin reached $20,000, prompting many people to invest in it. Even though its price keeps changing, it is still a must-have option for many investors.
As a decentralized currency, Bitcoin provides greater freedom and less bureaucracy in transactions. Bitcoins are delivered to and received from people with whom you are in direct contact. Another advantage is that the virtual currency is not subordinate to any financial or governmental institution and that, should a country’s economy collapse — or even the global financial system itself — Bitcoin can be unscathed.
As there are still few businesses that accept payments with Bitcoins, most of the users who own the virtual currency buy it to invest, expecting an increase in value, and not to purchase products. Being the pioneer in a certain industry in accepting this type of payment is, therefore, a great opportunity to conquer this public. Sites such as CoinMap, SpendBitcoins, BitcoinSearchEngine and others will collaborate in spreading your business amongst users.
The average fee charged on a Bitcoin transfer between two users is much lower than that charged by a bank. That financial advantage also applies to merchants, who will not need to pay a fee for a credit card transaction or online sales intermediaries such as PayPal. In addition, as most governments do not have legislation on virtual currency, there is no need to declare this type of investment.
Disadvantages of Bitcoin
Despite its many advantages, there are a number of concerns with Bitcoin that are significant barriers to its development:
A volatile currency
Most people are not ready and not sufficiently trained to face the volatility of cryptocurrencies and put their savings in a virtual wallet which, if not secured, can disappear overnight (death of the medium, loss of data, hacking…). Moreover, the transactions are irreversible and there is no possible recourse.
An infinitely duplicable system
Since Bitcoin is open source, the system can be endlessly duplicated to make other digital currencies, at the risk of losing users completely and diminishing the value of the concept.
Bitcoin, a boon for mafias
The anonymity of transactions, the absence of controls and borders… for traffickers, Bitcoin combines the advantages of cash with those of online payment. In addition, for the same reasons, it promotes money laundering and tax evasion.
Bitcoin is not a trading currency
With a cap of 21 million, bitcoin will still have value but will be a constantly deflating currency. Under these conditions Bitcoin is unlikely to become a dynamic currency like the melting currencies and could remain forever an inert value, a mere investment.