We are going to explain what the basic concepts are so that you understand what Bitcoin is, a cryptocurrency that everyone has been talking about for some years. This explanation will also help you to know exactly what cryptocurrencies are and how they work, so that you can have a little technical notion of how all this works and what we mean by each term.
It is a guide with which we want to explain everything in the simplest way possible, trying not to resort to technicalities or words. We will start by telling you what Bitcoin is, and we will continue explaining what cryptocurrencies are in general so that you understand it better. Then, we will tell you what the Blockchain it is based on is, and how you can get them.
What is Bitcoin?
Bitcoin is a cryptocurrency or virtual currency, specifically the first to be developed. It is the cryptocurrency that has led the way for all the others that came later using its technology. This technology is the chain of blocks or blockchain, which is also used for other things.
The first of the cryptocurrencies was created “Satoshi Nakamoto”, which is the pseudonym that corresponds to a person who nobody knows exactly who he is, although there have been many theories. This person published an article in 2009 in which he described a P2P payment system that he called Bitcoin. After a few months, he himself published the first version of the software that allows managing the coin network, and begins to interact with the first interested parties in forums.
The total number of bitcoins issued each year is determined by its algorithm, and the same is true for all other cryptocurrencies. Bitcoin is developed so that its production is reduced by two every four years, and so that only a total of 21 million Bitcoins are issued. Afterwards, they will simply stop being created.
This is a fundamental difference with conventional currencies, since banks modify their value at their free will. Therefore, currencies can be devalued, while bitcoin wants to offer a little more stability.
What Exactly Is A Cryptocurrency
Cryptocurrencies, also called cryptocurrencies or crypto assets, are a digital medium of exchange. Many times it can fulfill the function of a coin, and that is why they are known by that name. However, it can also be used as a financial asset, people buy them and when their value goes up they sell them.
We can consider them as a decentralized alternative to digital currencies. Come on, a euro or another currency with which you pay online are organized and controlled by entities and banks. Meanwhile, cryptocurrencies are not controlled by anyone, there is simply a series of connected computers in which their movements are replicated so that it is a safe method.
The value of each cryptocurrency is variable, just as if they were stock assets, and in recent years there have been a large number of changes in their value. Sometimes it skyrockets, and other times it plummets. Despite this, its value as a financial asset has gradually become its main attraction, although it can still be used as a payment method on sites that allow it.
Each cryptocurrency has its own algorithm, which is the one that manages the number of new units that are issued each year. As we have said, Bitcoin has been developed so that only a total of 21 million are issued, but each cryptocurrency will have its own algorithm determining the maximum number of units that will be generated.
Finally, we emphasize that it is a totally virtual system. Just as with one euro you can pay online or in physical format, there is no physical version of Bitcoins with which you can pay in stores. You may see photos or images of Bitcoin coins on some sites, but these are decorations that have nothing to do with the actual product.
How Cryptocurrencies Work
To understand how Bitcoin and cryptocurrencies work, you must understand that they work through the Blockchain, also known as [chain of blocks]. It is a decentralized computer network, where each computer is a node, and these are distributed throughout the world. In them, exact copies of all the transactions that are carried out are made, so that the network is capable of supporting itself when saving the changes.
Come on, Bitcoins are not based on servers that may exist within a company and that can be turned off. If one of the Blockchain nodes shuts down, nothing will happen, since the rest will continue to have a copy of all the transactions.
In addition, the information navigates through this computer network protected by cryptography. To this we must add that each block links to a previous block, as well as a date and transaction data, and by design they are resistant to data modification. By only having information from the previous block, the nodes do not know exactly where the information comes from, each link in the chain only knows the previous one, which also improves their privacy.
Therefore, it is as if this network or chain of blocks were an open and public library in which all the transactions made by two users are recorded. When you make a transaction, its data is recorded in a block, and it is automatically replicated in the rest. This means that the data cannot be modified or manipulated without modifying the rest of the blocks, something extremely complicated.
How Can You Get Bitcoin
If you do not have computer knowledge or the money to be part of the nodes mining cryptocurrencies, the easiest way to obtain them is to buy them in specialized services. These are large platforms with a good user base, and they simplify the procedure as much as possible.
They are called Wallets or portfolios, because they do that function. You create an account and put real money from your credit card. And through these platforms, you can use your money to buy Bitcoins or other cryptocurrencies. These Bitcoins are linked to your account within this cryptocurrency, and you will be able to see its evolution.
These online services take a commission for each transaction you make, and it is through them that they earn their share of money and stay online. Each wallet can have its functionalities, and some can be used to pay on some web pages, or have a different catalog of cryptocurrencies that you can buy.
What you should know is that your Bitcoins will be linked to your profile within each wallet, and although in many cases you can send them from one to another, you should never forget your service password, since this may mean that you are no longer able to access your wallet and your cryptocurrencies.
Are Bitcoins Safe?
Today, as a method of payment, Bitcoin is safe and private, although it is still not accepted on most major platforms. So, if you want to buy some Bitcoin to make a private purchase with it, we could say that yes, they are safe.
But if you want to use them to make money by buying them low and selling them high, then no, it is not a safe financial asset. It is not convenient to play trading if you do not fully understand how this game works, since its value can plummet without warning at any time, and you can lose almost all your money… or you can have to wait months or years for the sale value is the same as the purchase value.