What is BITCOIN (BTC) and why do we need it?

The question, “Why do we need money?” – sounds absurd. For thousands of years, people have been using this or that as an equivalent of the value of any goods and services in trade transactions. Precious metal ingots, shells and even bottles of alcohol have been used as currency. Gradually they were replaced by paper money, and with the advent of the Internet, traditional currencies were transformed into digital forms. No, they have not ceased to be dollars, pounds and yuan, just a thick stack of hundred dollar notes replaced by a small piece of plastic with a microchip or a smartphone app that displays your balance.

It would seem that, well, everything is good and convenient, progress has reached another peak, you can enjoy all the benefits of civilization and enjoy your life in peace. However, in spite of high level of security, bank systems are rather vulnerable to hackers. This is half the problem, the main problem is unlimited emission. Any government can print as many national currency notes as it wants and with e-money it’s even easier.

This inevitably leads to inflation, and the printing press gets to work again to maintain the living standards of the citizens at least on some more or less decent level. The result is a vicious circle. In addition, the intermediary services of banks are costly, and often artificially inflated, so that the top managers of financial institutions can receive bonuses comparable to the fees of the highest paid movie actors or the incomes of successful businessmen. The conclusion to be drawn from all this is that the world’s financial system is in need of serious modernisation.

All of a sudden, a new digital currency, Bitcoin, appears and, first quietly, then at an accelerating pace, begins to penetrate the global financial system. And if for the first few years, many people simply dismissed the idea that Bitcoin was just another pyramid scheme, which was about to burst, leaving money to naive enthusiasts, who believed in some mythical Satoshi Nakamoto. Who is he, has anyone even seen him? Everything makes sense, except for a few circumstances.

In this review we will explain in details what Bitcoin is in simple words, and why BTC cryptocurrency is one of the forms of money of future, intended to replace fiat currencies.

What is BITCOIN (BTC) in simple terms?

Bitcoin is a digital payment system that uses cryptocurrency (a digital exchange medium) and Peer-to-Peer (P2P) technology to create and manage monetary transactions. The open-source P2P network creates Bitcoins and manages all coin transactions. Bitcoin virtual money emerged against the backdrop of a deep economic crisis and societal decline in trust in financial institutions.

The term cryptocurrency can be deciphered roughly as follows. A cryptocurrency is a digital asset that is created and controlled by a system based on asymmetric cryptography. The cryptocurrency network is fully decentralised, meaning it has no single governing body and is not subject to external regulators. Blockchain technology is used to create the cryptosystem. All information within the network is laid out in plaintext, and its immutability is guaranteed by elements of cryptography.

Blockchain is a continuous chain of blocks in which information about all transactions is encrypted. A new block is formed when one of the nodes on the network finds its digital signature. In essence, each block of the crypto-network can be compared to a separate chapter of the ledger, which contains information about the previous chapter and all the financial transactions entered into it. The cumulative set of data, written in a strictly defined sequence, is the blockchain. The integrity of its structure is ensured by cryptographic protection.

Bitcoin is a cryptocurrency that is the monetary unit of the system. Bitcoin doesn’t look like regular notes or coins, it’s basically just a set of numbers. It can’t be put in a pocket or a safe deposit box like paper notes or gold bullion. Nevertheless, internet assets are perfect coins, which are impossible to counterfeit:

  • Forged;
  • Forbidden;
  • Destroy.

With these coins, you can pay anywhere, anytime. They do not wear out or tear like paper banknotes, but if you are not careful and careless, they can be stolen by taking your private key, or you yourself can lose your access code to your assets. The Bitcoin coin is divided into 10,000,000 pieces called Satoshi for ease of calculation.

Why BITCOIN (BTC)?

First and foremost, Bitcoin is a well-protected asset. No matter how hard they try to protect the hundred-dollar note from counterfeiting, counterfeiting has not diminished. The US Federal Reserve estimates the number of counterfeit dollars is about 50% of the total in circulation. Cracking into bank servers is difficult, but by and large, feasible. In addition, the financial institutions themselves can manipulate customers’ non-cash accounts and print as many banknotes as they like.

Cryptocurrency cannot be manipulated, which puts it one step above traditional money. In addition, the way the Bitcoin network works allows payments to remain anonymous. The governments of 99 countries have officially allowed the use of BTC as a means of payment. The cryptocurrency is popular in developed countries such as:

  • Japan;
  • UNITED STATES;
  • Canada;
  • Germany;
  • Denmark;
  • Sweden;
  • USA;
  • Canada;
  • Germany;
  • Denmark;
  • Sweden;
  • Australia;
  • Singapore.

There you can find special Bitcoin ATMs for transactions, and in Singapore you can even buy a Bitcoin note. Of course, this is not paper cryptocurrency, but a “cold wallet” that holds a certain amount of virtual coins. By paying, the customer receives, stored in paper form, the keys to access the vault.

Bitcoin is used to store assets. People who bought the first cryptocurrency in the early years of its existence secured a life without poverty. Just 9 months ago, during a market downturn, Bitcoin could be bought for $3,200, but now 1 BTC is worth $35,000, and at the peak of the rise it was as high as $80,000. One Norwegian citizen bought 5,000 BTC for $27 and forgot about his capital for years, but when he found out that the cryptocurrency had soared in value, he couldn’t find the private key of his Bitcoin wallet for a long time.

But in the end he succeeded, at that time 5,000 BTC were worth $880,000. If he didn’t immediately convert them into fiat, his fortune is now equivalent to $175,000,000. And most members of the cryptocurrency community are sure that this is not the limit at all. According to the boldest predictions, the price of one digital gold coin will rise to a million U.S. dollars sooner or later. This may be an exaggeration, but it is quite possible that in two or three years, 1 BTC will be worth $100,000. So the peak of the crypto fever is yet to come.

Crypto traders make fortunes by playing on exchange rate fluctuations and differences in the value of coins between trading venues. An analogy is often drawn between Bitcoin and gold, the amount of crypto coins and the noble metal stock is limited and both assets can easily be exchanged for traditional money.

Where does BITCOIN (BTC) come from?

A cryptocurrency is a high level of cryptographic code created during the processing of a complex mathematical calculation, or to put it another way, an algorithm solution. Only powerful computing equipment can cope with such a task. Initially, the processing of the hash code was carried out by central processors. Later, the coins were mined on video cards, but nowadays this requires special devices on integrated circuits (ASICs).

BITCOIN (BTC) mining machines:

Are quite expensive ($2,000 – $6,000);
Consume a lot of power;
Highly noisy;
Require special skills to set up and run.

Cryptographic calculations form new blocks, for their solution ASIC-miner owners get certain amount of coins (in current period 6.25 BTC). That is, the generation of a certain number of digital coins is embedded in the cryptographic code of the blockchain project. When a miner solves the next task correctly and other nodes confirm that the block signature is indeed found he is automatically rewarded with virtual coins. Of course, there will come a time when no new Bitcoins will be generated when the block is solved, but there is still a network fee for processing each transaction and the more expensive a given coin is, the higher the miners’ commission.

Decentralisation of BITCOIN (BTC)

The Bitcoin network, like most other cryptocurrency systems, is peer-to-peer, meaning that all members are equal and there is no governing body, or external regulator. Therefore, the correctness of the algorithm is verified by the nodes in the system. If it matches the blockchain structure, it is included in the chain, if not, the work of the miners is in vain, you have to keep going.

All the nodes are independent and cannot affect each other in any way, and each node keeps a complete copy of the blockchain. Even if some of them go offline it will not affect the system. In the event of a major disaster, a single copy is enough to restore the network.

According to the online publication Forklog, the bitcoin network has 11,619 full nodes, each of which holds a full copy of the blockchain. In total, there are more than 38 million active addresses, according to the blockchain browser https://www.blockchain.com/ru/explorer. In the beginning, the bitcoin network consisted of two computers, one of which was owned by Satoshi Nakamoto and the other by Hel Finney. By the way, let’s talk more about what a blockchain browser is.

Block Explorer BITCOIN (BTC)

When developing a new crypto project it is necessary to create a separate Block Explorer, without it the functioning of the distributed payment network would not be possible. Such service is very necessary, but if you are constantly working with several digital currencies and, regularly monitor the status of this or that blockchain, you would prefer a universal search engine.

It is much more convenient to go from one network to another with a single click, rather than storing a bunch of links and opening a new window every time. Of course, no engine has yet been created to search any of the 7,784 distributed payment networks. But, a universal solution that supports 17 top cryptocurrencies as well as ERC-20 Omni and Laer tokens exists. The resource is called Blokchair, and you can use it to track transactions and get other information such as text messages, PDF checks, and charts of cryptocurrency rates:

Bitcoin;
Bitcoin Cash;
Ethereum;
EOS;
Ripple;
Litecoin;
Monero;
Dash;
Zach;
Dogecoin;
Stellar;
Tezos;
Cardano;
Bitcoin SV;
Bitcoin ABC;
Mixin;
Groestlcoin.

The official website of this search and analysis service can be found at https://blockchair.com.

The interface is translated into seven European languages, including Russian. An API is available for developers, with support for filtering, sorting and aggregation of information. The Blockchair Feed option allows you to read texts posted on Bitcoin, Bitcoin Cash and Ethereum blockchains right on the fly. It also displays messages from the decentralised social networks Blockpress.com and Memo.cash.

If you don’t want to search for a bookmark every time, add the “Relase Monitor” app to your Google browser to enjoy a wide range of universal blockchair services via the search engine bar. The Blokchair team is constantly busy updating and extending the features of the service. You can contact support via email info@blockchair.com or through the social networks Facebook, Twitter, Linkedln, Telegram.

The main goal of the developers of the project, – to make a resource similar to Google search engine for cryptocurrencies, and they successfully realize their plans. You can see links to information from Blokchair on Coinbase, HitBTC, Coinmarketcap, CoinGecko and other crypto industry websites.

What is BITCOIN (BTC) backed by?

Bitcoin is not directly backed by commodities, gold or fiat money, unlike stabelcoins. But, large business structures, such as Dell, are interested in development of alternative payment system:

  • Dell;
  • AppStore;
  • Microsoft;
  • Amazon;
  • RE/MAX;
  • Victoria’s Secret;
  • Tesla;
  • Reddit.

This is by no means a complete list of cryptocurrency backers. On the Bitcoin network, the equivalent of $94,000,000 in payments is made per day on average, and the processing power of the network is 99.4 Ehash. Bitcoin’s best security is its unique properties:

  1. Decentralisation;
  2. Anonymity;
  3. Transparency;
  4. Cryptographic protection;
  5. Low fees.

According to blockchain.com, transaction processing fees are as low as 0.619% of total funds turnover, according to blockchain.com. At the beginning of September last year, a transaction of over $1,000,000,000 was recorded on the blockchain, which is how big the BTC transactions are.

BITCOIN (BTC) issuance

The issuance of national currency is controlled by a country’s government, but purely physically the amount of money supply is not limited by anything, and you can print as many dollars, pounds or rubles as you want. On the other hand, bitcoin generation has a strictly set limit, which is embedded in the system’s software code and is not subject to revision.

After miners get 21,000,000 BTC, the issue of new coins will be finished. It is estimated to happen no later than 2149, but by the middle of this century the active growth of crypto-mining structure will stop and miners’ earnings will be transferred to the field of commissions.

How can I get BITCOIN (BTC)?

Bitcoin, like any other cryptocurrency, is earned by mining on special equipment. You buy a device on integrated circuits whose sole purpose is to produce bitcoins and other cryptocurrencies based on the SHA-256 algorithm. The lion’s share of BTC mining is done in big data centres, but if you have the means to run an ASIC you can host it in your home and get bitcoins for your wallet by running it.

ASIC cannot be kept in a flat or a private house because of the noise produced by the cooling system fans. It is true that some craftsmen make sound-absorbing boxes or convert their devices to liquid cooling, but this requires additional costs and is not suitable for every user. Usually, integrated circuit devices are placed in a separate room, such as a garage, or specialised mining hotels are used.
You will not be able to mine bitcoins with video cards, but you can earn other coins and exchange them for BTC, or you can rent your bitcoins to NiceHash, or Mining Rig Rentals and get paid in bitcoins.

You can collect some satoshi by visiting bitcoin cranes regularly. These are sites where users are paid a small amount of cryptocurrency for completing simple tasks. These satoshis can then be withdrawn to your wallet or a micropayment collector from the money cranes. You won’t be able to collect a whole bitcoin, but such sites are great for learning about cryptocurrency.
There are freelancing exchanges like Xbtfreelancer or Cryptogrind where performers get paid in bitcoins.

And in the end, you can always buy Bitcoin for regular currency. We will tell you how it works in a separate chapter.

What can I buy with BITCOIN (BTC)?

BTC cryptocurrency can not only be easily exchanged for other assets, it can also be used as a means of payment in many developed countries. Japan holds the palm of the hat. In the Land of the Rising Sun, 260,000 retail shops accept bitcoin payments.

Virtual assets are suitable for buying groceries, transport, real estate, airfare or hotel rooms. Some educational institutions are accepting tuition fees in cryptocurrency. The US Republican Party accepts donations for its development in BTC. The cryptocurrency is used by Virgin Galactic, a space tourism company.

There is regular news that a bar or restaurant has opened in one state or another that supports Bitcoin payments. In Argentina, cryptocurrency can be used to pay for public transport fares, utilities and fiscal fees.
The Spendabit search engine can help you find shopping platforms and shops that sell their goods for Bitcoin. Using Spendabit is easy, just type in the search box and you will get a list of outlets.

To search for goods for cryptocurrency on the decentralised OpenBazaar platform, use the Duosearch search engine. You can also install the Haven Private Shopping app, to search for goods on OpenBazaar via your smartphone. Luxury goods, villas, yachts and cars are purchased for BTC. Some financial experts believe that in the future, Bitcoin will become the digital standard of value. That is, BTC digital coins will be stored instead of gold reserves, which is very convenient and practical, but cheaper alternative coins will be used for everyday settlements. Then bitcoin ownership will become a status indicator, hurry to buy digital gold before its value soars to exorbitant heights.

Even now, though, the purchase of a single BTC coin and not everyone in our country, or in any other developed country, can afford such an investment. But still, let us tell you how to do it. Basically, you do not need to buy the whole coin at once, to start it will be enough one-tenth or even one-hundredth part.

How to buy BITCOIN (BTC)?

You will find crypto exchanges online, where you can buy Bitcoin for fiat money. For the residents of CIS countries the following trading platforms will be suitable:

  1. Binance;
  2. OKX;
  3. CoinBase;
  4. FTX;
  5. Exmo;
  6. Yobit;
  7. Huobi.

Clients of the Binance exchange can buy Bitcoin for roubles in four ways:

Using a credit or debit card directly from the exchange administration;
Directly from other traders in the P2P trading branch;
From a fiat balance on the spot market;
Through the built-in exchangers of the partner companies.

Each option has its pros and cons, and you need to choose based on your preferred payment method. If you need to buy quickly and you pay by credit card, you should choose the first option.

There are special Bitcoin ATMs that can be used to buy cryptocurrency for regular money, but they are not available everywhere. In Russia, there are a few dozen such devices operating in Moscow, St. Petersburg and some other major cities.

How to store BITCOIN (BTC) coins correctly?

We should clarify right away, the cryptocurrency is in a blockchain, not in a wallet. You only store a secret key that allows you to make transactions from the bitcoin address linked to it. In addition, the wallet balance and transaction history are displayed in the software interface. The main security rule is to keep the access code always offline and not to tell it to anyone.

The wallet can be:

  • A program to be installed on your hard drive;
  • Mobile application;
  • Online service;
  • A hardware safe, for storing private keys electronically;
  • A piece of paper with a public and private key printed on it, which is generated by a special online resource.

To receive funds to the paper wallet, all you need to do is tell the sender the address of the wallet. To complete the transaction yourself, however, you will need to use the web wallet interface.

The most secure way to store bitcoins is with a hardware safe. The device is in the form of a thumb drive with a mini-display, blocking access for hackers, and you can safely make transactions with your assets. The best manufacturers of hardware safes are Ledger and Trezor.

PC-based wallets are divided into “thick” wallets, which require downloading the entire blockchain, and “thin” wallets, which means they are synchronised with a remote server. Mobile wallets are very handy for paying with bitcoins at merchants that accept the cryptocurrency. But more often than not, users prefer to work with online services that do not require the installation of additional software. Particularly popular are:

  • Trust Wallet;
  • Blockchain;
  • Coinbase;
  • Circle;
  • Xapo.

But, for long-term storage of large amounts of cryptocurrency, a hardware safe is recommended. This device is a minicomputer in the form of a large flash drive with buttons and a display.

Its sole purpose is to store private keys to access the blockchain. The hardware safe is connected to a normal PC to make financial transactions, and even if the computer is infected with a virus no hacker will have access to your private keys.

Conclusion

It is not possible to explain all about Bitcoin in one article – that would take a whole book. But, now you have a general idea about the first cryptocurrency and, if the topic interests you, you can continue to study the materials on the website. There are also Bitcoin analogues claiming to take the place of the patriarch, and fundamentally different cryptocurrencies such as Ethereum. Bitcoin is not just an alternative payment system, its creation, opened the door to a new reality, and ushered in an era of cyber-economy.

Over the last two years, many unique projects have been launched, a whole sector of decentralised financial services has emerged, and now cryptocurrency can be earned by investing digital assets in liquidity pools. The blockchain industry has already become an integral part of the global financial system.

If you compare the monetary characteristics of traditional currency, gold and bitcoin, the advantages of virtual coinage become obvious. Sooner or later, but sooner rather than later, all the regulatory issues surrounding the use of cryptocurrency will be resolved and then the world will change for the better. Start using cryptocurrency today. Good luck to you!

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