What is bitcoin?
The cryptocurrency market might seem like a seven-headed bug to many people, and if you still do not have any knowledge about this market, then know that this is completely normal.
Bitcoin is a digital asset used to buy and sell products and services online, and is basically a payment method similar to the fiat money we use today. Unlike other currencies such as the real, the euro or the dollar, bitcoin today only exists in a virtual environment and is stored in digital wallets.
Bitcoin emerged in 2009 as a way to facilitate online commerce. We know very little about its creator, except that it was a programmer or group of programmers who used the pseudonym Satoshi Nakamoto. Satoshi is also the name of the smallest part of Bitcoin, for example, similar to a penny.
Bitcoin is a decentralized currency, that is, it is not managed or controlled by any financial institution such as a bank to arbitrate the exchange of money between two people. Due to decentralization, Internet transactions are faster and cheaper, and cryptocurrencies can be used in any country without special restrictions or conditions.
Due to its rapid rise, Bitcoin has become the application of choice for many high-income people. Thousands of people have multiplied their wealth by buying Bitcoin, but it is important to understand how this market works before entering into the world of cryptocurrency.
Bitcoin has been the most profitable investment in the past five years, and its high appreciation is due to the wide adoption by many companies and even countries like El Salvador. Since Bitcoin values itself through the law of supply and demand, these adoptions fully support the popularity of Bitcoin, thus attracting more investors, which increases the market capitalization and, as a result, increases the price of the cryptocurrency.
Recently, a bill was approved to regulate the digital currency market in Brazil, and this is something that will become common in the coming years. With the huge adoption of Bitcoin, many countries tend to regulate this market.
How does bitcoin work?
The foundation of the entire Bitcoin ecosystem is cryptography. It is she who keeps the system secure and fully functional, ensuring that all transactions are carried out securely and anonymously. This is why Bitcoin is also known as a cryptocurrency.
In a simplistic way, Bitcoin is stored in an online digital wallet or even in physical wallets that store cryptocurrencies without the need for the Internet. Bitcoin works through a complex and unique code that cannot be changed in isolation.
The entire Bitcoin ecosystem is based on the blockchain network. Blockchain technology is nothing more than a public ledger that records all transactions in Bitcoin, so when the record is created in one of the blocks of network information, it becomes permanent and immutable.
In a more simple way, the blockchain records information such as: how much Bitcoin was sent, which wallet sent, which wallet received, when the transaction occurred, and where it is located in the world ledger. This shows that transparency is one of the most important features of the blockchain network.
Since the currency is not managed or regulated by any financial institution, the processing of transactions is done by so-called miners.
What are miners?
Some people think that mining bitcoin is similar to mining gold ore, but that doesn’t work. Cryptocurrency mining is the name given to the process of validating and adding new transactions to the blockchain.
In other words, mining is interested in circulating more cryptocurrencies, just as central banks do by “printing” money. The main difference is that with a digital currency like Bitcoin, there is no authority controlling the process – everything is controlled by an algorithm. What makes bitcoin a decentralized currency?
The Bitcoin algorithm or consensus mechanism is called Proof of Work or Proof of Work in English. This protocol defines the operational steps of the system, such as what to do when a transaction is executed, to organize it into a specific format and how to perform verification and validation, and to permanently enter and record information in the blockchain network.
This consensus mechanism started to work alongside Bitcoin and is used as a validation basis for thousands of other cryptocurrencies today.
Is bitcoin safe?
Blockchain technology is revolutionary and has applications even outside the cryptocurrency world, being one of the main technologies responsible for the security of Bitcoin transactions. Decentralization of information (i.e. not centralized on a single server) helps prevent piracy.
Processes are grouped into blocks of information that are protected by a strong encryption layer. For every transaction made on the network, a copy of each transaction is simultaneously sent to thousands of computers around the world. This makes tampering with the system basically impossible.
Another point that enhances the security of the Bitcoin ecosystem is the fact that since its inception until today, there has not been a single hacking attack, instability or any other type of interference on the network. Making the ecosystem very secure.
How do you buy bitcoin?
It is possible to buy Bitcoin in two different ways. The traditional and most famous way is through a Cryptocurrency brokerage. Brokers or exchanges are intermediaries in the negotiations of buying and selling crypto assets, in a more simple way, it is a platform where buyers and sellers communicate, mediating these negotiations.
Another well-known method is to buy Bitcoin via P2P (Peer-to-Peer). Basically it is the person who keeps bitcoins in their wallet and sells them to someone else, receiving credit money in the form of real money or dollars. The process is done in a similar way to a bank transfer, whereby the selling party sends the bitcoin to the buying party’s wallet, which in turn sends the amount in fiat currency to the selling party. This same process can happen with cryptocurrencies, for example, one person sells Bitcoin to another person, who pays in Tether USDT for example.
Is it worth investing in Bitcoin?
In short, Bitcoin is, basically, a means of payment just like the real euro or the dollar, however, its ecosystem is completely decentralized, and in this way, its security becomes one of its main pillars, in addition to the possibility of sending Bitcoin from a wallet in Brazil to anywhere else in the world In minutes, unlike paper money which involves many bureaucracies. Another factor that increases the security of the ecosystem is the use of the blockchain, which is a highly secure technology that is used as the basis for many projects in the crypto world.
Bitcoin has a bright future ahead of it, that is a fact, given that it has been adopted by large corporations and even countries, however we are in a pessimistic economic moment around the world, but that does not change the fact that Bitcoin is indeed a great investment for the long term. Since even at the lowest levels, those who invested in Bitcoin 5 years ago are making an excellent profit.
So, even though Bitcoin is a great investment, don’t be too thirsty for spring, manage your investment portfolio well and always diversify well, to minimize your risk and maximize your profits.
Notice: The text displayed in this column does not necessarily reflect the opinion of CryptoFácil.
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