What is Bitcoin?

What is Bitcoin?

What is Bitcoin?

Bitcoin is the first cryptocurrency and a type of digital currency. It is an electronic coin launched in 2009 by Satoshi Nakamoto, a man whose real identity is still unknown. Nakamoto defines an electronic coin as a chain of digital signatures and proposes a system for electronic transactions without relying on trust.

Bitcoin is currently the most widely used and the best-known type of digital currency with a total value of $137 billion. In Satoshi’s paper called “Bitcoin: A Peer-to-Peer Electronic Cash System”, the transaction occurs as a purely peer-to-peer (P2P) version of electronic cash. By using a P2P distributed timestamp server, a computational proof of the chronological order of transactions is generated. Bitcoin is a SHA-256 POW coin with 21 million minable coins. But let’s dig a little deeper. Stay with us and learn more about this phenomenon.

What is Bitcoin? | How it’s made

Bitcoins are made through a mining process by which they come into circulation. Basically, it denotes a process of solving a computationally difficult puzzle in order to discover a brand new block, which is then added to the blockchain, thus being entitled to receive some new coins as a reward. As more and more bitcoins are created, the difficulty of the Bitcoin mining process increases, and the amount of computing power involved gets higher. Once, an ordinary computer was enough for the mining process, but now to combat the difficulty level miners must use much faster and more powerful hardware. Bitcoin mining is only possible with cryptocurrencies that follow the proof-of-work protocol, as explained in Nakamoto’s paper. After finding a solution to the cryptographic puzzle, a miner can build a block and add it to the blockchain. Blocks are files where bitcoin network data is permanently recorded. They record recent bitcoin transactions and serve a similar purpose as a record book. Each time a block is completed, it gives way to the next block in the blockchain. Blocks in Bitcoin Core, which includes transaction verification engine and connects to the bitcoin network as a full node with a digital wallet included by default, are limited to one megabyte.

Like any other cryptocurrency, Bitcoin is kept in a digital cryptocurrency wallet. The cryptocurrency wallet provides a secure way to send, store and receive various digital currencies. This kind of wallet contains private and public keys which allow one to send and receive coins. In 2017, the cryptocurrency market has grown to unimagined heights. For that reason, more people are interested in the subject and are entering the world of digital money. The main advantage of digital money is its decentralization because there is no central authority governing it. Unlike centralized exchanges, decentralized exchanges do not store any coins or private keys on central servers. Hackers have to work harder to find these assets and the passwords which protect private keys. In short, on cryptocurrency exchanges, one can buy, sell or exchange cryptocurrencies for other digital currencies or traditional ones like the US dollar or the Euro.

What is Bitcoin? | Cryptocurrency price and value

Every cryptocurrency has its price that is not to be confused for cryptocurrency value which is a perceived regard for Bitcoins’ or altcoins’ usefulness and benefits. Cryptocurrency prices are affected by supply and demand, media, investors, Bitcoin news etc. Also, Bitcoin price is dependent on the energy in the form of electricity used to secure a blockchain, as well as on difficulty of making a single blockchain. Like any other encrypted currency, it uses cryptography for security when buying or selling goods or services. In the middle of 2016, one block generated 12.5 new bitcoins. Bitcoin price, or price of any other cryptocurrency for that matter, is determined by supply and demand. When the demand for bitcoins increases, the price also increases, and vice versa. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Cryptocurrency prices are expressed as an exchange rate in a relation with another currency. For example, a Bitcoin to USD exchange rate is $8.182.40 BTC/USD.

Bitcoin Wallets

Bitcoin Wallets

Bitcoins have value because people accept it as a form of money. Unlike traditional currencies, they are based on properties of mathematics and not on psychical properties. As with all currencies, Bitcoin value comes only and directly from people willing to accept it as payment.

The cryptocurrency market is a general term related to a place where cryptocurrencies are traded. It shows the companies that list digital money with a name of an electronic coin, market capitalization, price, volume and circulating supply. On the other hand, a cryptocurrency exchange is an infrastructure that facilitates trading of cyber currencies.

What is Bitcoin? | Bitcoin rising

A Bitcoin or an altcoin can also be traded for USD or Bitcoin. Bitcoin is generally traded at the highest cost of all cryptocurrencies, like on November 21 this year when it was as high as $8.182.40. Ethereum is the second popular electronic coin with a more reasonable price of $368.26 and with the second highest market capitalization. The third most popular currency is Litecoin with a price of $71.38. The list on the cryptocurrency market is long, with more than 1300 digital currencies waiting to be traded.

Bitcoin Price Chart

Bitcoin Price Chart

In June 2017, Bitcoin to US rate reached all time high of $2.846 BTC/USD, but then it continued to grow and surprised on November 17 with an unexpected price of $7.969,53 BTC/USD. On November 20 the price for a Bitcoin is $8.019,96 BTC/USD and on November 21 the price reached $8,182,40 BTC/USD. At this point all Bitcoins in circulation are worth $137 billion. And while Bitcoin value is growing, altcoins’ value has been falling since the beginning of November.

What is Bitcoin? | Conclusion

As of November this year, there are over 16.7 million bitcoins in circulation with a total Bitcoin market capitalization reached its highest, with the total cryptocurrency market capitalization of $200 billion. Many observers look at the cryptocurrency as a hope, since it is more transportable then hard metals and it is outside of influence of central banks. Cryptocurrencies make it easier to transfer funds between two parties in a transaction, but are not immune to the threat of hacking. Any latest information about this digital currency can be found rather easily because Bitcoin news are pretty easy to reach. For those interested in investing in cryptocurrencies, most important is strategy, so make sure you’re well informed before you start. Our website will help you find the right exchange. Select a coin, check the price, use indicators, be smart and good luck.

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Author: Ben Prescott
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