What is Bitcoin in simple words. An overview of the Bitcoin cryptocurrency (BTC), description, online chart, course, history, operating principle

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Probably, all residents of the developed countries of the world have heard about the bitcoin cryptocurrency. But for many, this word remains something incomprehensible. The editorial staff of Btcnewsweb.com will try to understand in detail what Bitcoin is in simple words, what it is for, how it works, and will tell you about the process of receiving, exchanging and how to earn Bitcoin.

Bitcoin is a record in a distributed public ledger (blockchain). Bitcoin is used as a payment system, an investment instrument, a financial instrument for speculative trading. Cryptography is used to protect the blockchain network.

BTC price to USD

Name Price Market Cap Supply Change % (7D) Performance
1 Bitcoin
$42,035.89
$791,206,079,178.84 18822156 BTC
-0.82%

Basic information

Information about cryptocurrency on 07/18/2019:

NameBitcoin (in Russian биткоин)
TickerBTC
Typecryptocurrency
Maximum emission21 million
Current issue17.517337 million
Cost on 07/18/2019$9813
Capitalization$ 60 billion
Cryptocurrency exchangesBinance, EXMO, Currency, Bitmex, Bybit, Crex24, BitForex, LocalBitcoins, Huobi, etc.
Bitcoin exchangersProstocash60cekKassaBaksmanPlatov, Ramon Cash, BitObmen, Delets, Mchange
1 Satoshi0,00000001 BTC
TechnologyBlockchain
EmissionBy mining
Mining algorithmSha-256
Consensus AlgorithmProof-of-work, abbr. POW (proof of work)
Reward for miners for the mined block12,5 BTC
Average block signing and confirmation time10 minutes
Number of transactions per second7
Blockchain ExplorerBlockchain.com and others
HalvingMay 2, 2020
CreatorSatoshi Nakamoto (pseudonym)
DevelopersA group of unknown developers
Date of creation of the first block (genesis)03.01.2009
First transaction12.01.2009
Original price1BTC=0,00076$
The first bitcoin exchangeBitcoin Market
First purchase2 pizzas for 10,000 BTC on 05/22/2010
First p2p deal16.10.2010
Maximum price19535$
Programming languageC++
Official site of developersbitcoin.org
Official bitcoin walletBitcoin Core 0.17.1
WalletsExodus, Electrum, Jaxx, Coinomi, Matbea and others

What is Bitcoin

In its simplest sense, Bitcoin is a computer program. However, it is not located on one specific computer, but simultaneously on thousands and millions of PCs directly connected to each other through this program. The principle of operation is similar to torrents. We will tell you more about the work of bitcoin in the corresponding section.

Such a system is called decentralized. It is almost impossible to hack or take control of it in any way. The main instrument of circulation within the network is BTC, virtual coins that exist exclusively on the Internet.

In simple words, bitcoin is digital money on the Internet. The emission and management system is decentralized. The cryptocurrency does not have a central government body and is not supervised by financial institutions in the countries of the world. The operation is based on blockchain technology and cryptography.

Interest in Bitcoin has increased in 2017. According to Google Trend statistics, the peak in popularity of the word “Bitcoin” fell on December 2017:

Popular searches for the word “bitcoin”:

Bitcoin exchange rate history since 2009, dynamics of growth and decline

Like any means of payment, albeit a virtual one, the bitcoin cryptocurrency has a rate (usually the rate is taken in relation to the US dollar). It is interesting to watch its ups and downs over the 10 years of its existence:

✅   For the first time, a specific course was recorded in October 2009. At that time, 1309.03 coins were given for 1 dollar. That is, by spending just a few USD, one could buy a huge amount of bitcoins. Due to its low cost, the cue ball was not yet subdivided into satoshi.

✅   In May 2010, Bitcoin was given $ 0.008. Then a turning point happened – a real product was bought for the first time with a digital coin. These were two pizzas with a total value of $ 25 or 10 thousand BTC.

✅   By mid-2010, the cue ball showed a tenfold increase and came to a cost of USD 0.08, and by the end of the year this figure was already 0.5.

✅   In 2011, the bitcoin rate for the first time caught up with the dollar rate. By March, the price had risen to $ 31, but soon fell sharply. This is due to the fact that hackers, sensing the prospects of the currency, began to try to hack wallets and exchanges. It was not safe to own bitcoin back then.

✅   Throughout 2012, the exchange rate was relatively flat.

✅   But 2013 showed a real explosion – by the end of November, the cost of BTC exceeded $ 1200. True, it soon dropped by 2 times due to the ban on the use of cryptocurrency in China.

✅   In 2014, the rate of the cryptocurrency did not change much, but the coin was confidently entrenched in the market.

✅   2015 saw sharp ups and downs (range – $ 281 to $ 355).

✅   Throughout 2016, the value of the cryptocurrency gradually grew, despite the scandalous departure from the team of one of the developers, and by December it had reached $ 1000. In addition, in 2016, the market capitalization of the currency reached $ 30 billion.

✅   In 2017, the popularity of bitcoin was at its peak. In December, the exchange rate reached a record value of $ 20

✅   2018 was not so successful. For the most part, the currency price was stable at $ 6,500, but in November it sank heavily and still cannot recover. As of January 2019, the bitcoin cryptocurrency rate is 3.5 thousand dollars.

How to get, buy, earn bitcoin

There are different ways to get bitcoins. Some of them are already losing their relevance, while others are still quite in demand.

Mining cryptocurrency bitcoin

The process of mining cryptocurrency is to solve mathematical problems simultaneously with thousands of computers connected to the network all over the planet. The end result of mining is getting BTC coins. The system is secure due to the fact that the process is distributed among all participants, and not controlled by a single server or center that issues money.

Each payment made within the network is recorded in a special log open for general access. The task of miners is to select the desired hash among a million combinations that would fit all recent transactions and a “key” that guarantees a reward in the form of a certain number of Bitcoin coins. This is called block closing. The block of transactions is immediately added to the blockchain, chain. Many miners are competing for the reward at the same time, most of which are pooled.

When the first mentions of cryptocurrency and software for them appeared, everyone could easily find a new block and get the coveted bitcoins in the amount of 50 BTC. The mining equipment just needed to perform a certain algorithm of actions, mathematical calculations. But, bitcoin mining has become a massive phenomenon. Everyone wants to earn a virtual coin and the difficulty of mining has increased. To make money, you need to buy high-performance ASIC miners and get it together in a mining pool. On a processor or video card, mining Bitcoin doesn’t make sense.

Bitcoin cloud mining

Cloud mining does not involve the physical purchase of equipment, its configuration and operation. The point is to rent computing power from specialized online services that own mining equipment. You just need to go to their website, register, select an algorithm and amount of power and make a payment. You will receive the first charges on the day of purchase.

The following companies are popular on the market:

  • Genesis Mining.

Algorithm and complexity of Bitcoin mining

Every 2016 created blocks, which happens about once every two weeks, the difficulty is recalculated. This means that the system estimates how quickly these blocks were created. If the average creation time deviates less from the given one (10 minutes), then the complexity increases, and vice versa. Thus, approximately the same block mining speed is always maintained, otherwise, with an increase in the computing power of the network, coins would be mined too quickly.

Bitcoin mining difficulty graph for 2018-2019:

Bitcoin is mined in accordance with the SHA256 algorithm. The mining algorithm is used for comparative analysis of data and search for matches. If the hash lines match, it means that the original information has not been changed. Otherwise, the security system is compromised and there is a risk of data loss.

Bitcoin exchanges

On the Bitcoin exchanges listed below, you can buy BTC with cryptocurrency or fiat money.

LocalBitcoins

LocalBitcoins is a p2p service for exchanging currencies. This means that users contact each other directly, and the exchange acts as a guarantor of transactions, charging 1% of the payment for its services. The site works with cryptocurrencies, bank cards, and cash.

The ability to exchange for cash is especially valuable where bitcoin is not less than a certain legal status. So problems with banks and control bodies disappear. Basically, LocalBitcoins is a cross between an exchange and a traditional crypto exchange. However, there are less strict purchase limits – there is an opportunity to purchase both the whole bitcoin and only 2-3 thousand Satoshi.

At the time of the transaction, the money is transferred to a special account belonging to the service, and remains there until both clients confirm that all the conditions of the transaction have been met, and they have no complaints. Thus, the option of fraud is excluded. If at least one participant abandons the transaction, the coins will be returned to the owners.

Exmo

The Exmo cryptocurrency exchange has been operating since 2013 and has gained the status of one of the most famous platforms. It provides a lot of opportunities for financial transactions, of which the support for fiat money is the most important – you can buy bitcoin directly for dollars or rubles.

Binance

The Binance exchange is one of the youngest among the popular platforms. She was registered in Hong Kong in 2017. However, in a matter of months, Binance took the first lines in all tops of crypto-exchanges. Such a quick take-off has caused many suspicions that this is a HYIP project. However, time passed and the situation did not change.

Users call the advantages of the exchange a convenient interface, functionality, a large number of visual infographics, low commissions, and a generous affiliate program. Of course, we must pay tribute to competent advertising promotion.

Margin trading

Margin trading gives the trader the opportunity to use leverage to open a position. Suppose you open a buy margin order and your leverage is 1: 3. It follows from this that you will be able to purchase three times more cryptocurrencies than the funds in your account allow. Another point is course changes. If the purchased asset has risen in price by 5%, then your profit will be 15% thanks to the leverage.

Margin trading is a lot like lending. A cryptocurrency exchange or other platform provides the user with a loan and takes interest for it. It is beneficial for the exchanges that traders invest in large volumes of currencies, because the more interest the resource owners receive. The margin trading system has its own characteristics on each of the exchanges. On some, credit funds are provided directly by the platform, on others – by users, on others – by a brokerage company.

Bitmex

Bitmex is another well-known crypto exchange. Here you can trade with leverage, but it is strongly discouraged to do this without the proper level of training. Otherwise, you can very seriously go to the minus. The advantages of the platform include the following features: a wide variety of orders, trading on price drops, a demo account, and an integrated TradingView chart.

There are also disadvantages. High level of risk, small selection of coins, lack of a mobile application. In addition, the platform noticeably “slows down” with large trading volumes.

Huobi

Since its foundation in 2013, the Huobi crypto exchange has been one of the most popular in China, but it has been facing tough times due to the tough policies of the Chinese authorities. In 2017, the exchange opened on a different domain. There are over 200 trading pairs, of which the largest selection of pairs with bitcoin.

The platform itself is quite convenient for trading and has extensive functionality. Special attention should be paid to charts with a whole range of settings and options that allow you to track any time period. Numerous technical indicators help a lot in trading.

Bitcoin exchangers

In bitcoin exchangers, the commission is usually higher than on the exchanges, but this is partially offset by the convenience and safety of use. What they usually look at when choosing the best service:

  • list of supported currencies;
  • exchange rates;
  • do you need registration / verification;
  • what reviews about the exchanger;
  • how quickly requests are processed;
  • commission fees.

On different exchangers, the bitcoin rate may differ. This is due to two factors – the amount of funds on the accounts of the service itself, and the interval for updating the rate. In most exchangers, the BTC exchange rate is requested every 5 minutes, in some it is much more often.

Bitcoin faucets

A Bitcoin faucet is a simple site, usually consisting of one or more pages, that distributes cryptocurrency shares to users (for example, bitcoin satoshi). Such sites are classified as advertising.

It is free to use the crane, even registration is not always necessary. It is enough to indicate your e-mail and the address of the Bitcoin wallet where the money will be transferred. Then wait a little, perform a simple action and earn bitcoins. Cranes are mainly divided into two types:

  • Discrete. The remuneration is paid once in a certain period of time. The period is different on all resources, it can range from 1 minute to 1 day. Accordingly, many times more will be paid per day than per minute.
  • Cumulative. Here, the amount of the reward grows constantly, even when the site is closed and the computer is turned off. At a certain interval, the amount is fixed and sent to the participant’s balance, and the counter is reset to zero.

The actions for which the crane pays coins are also different: solve a captcha, click on a banner, play a bitcoin lottery or another mini-game.

The history of bitcoin cryptocurrency from the very beginning

In October 2008, users of the gmane.comp.encryption.general resource received a newsletter to their e-mail addresses. In it, a certain Satoshi Nakamoto talked about his invention – a fundamentally new digital currency and its advantages. At the same time, the bitcoin.org domain was registered, which works to this day.

Bitcoin is officially believed to have existed since 2009. It was then that cryptocurrency software was first launched in January. The very first block (genesis) was formed by the creators of the network, Satoshi Nakamoto (whose real identity is still unknown to anyone). A few days later, the first transaction was made, transferring funds from one participant to another.

In 2010, the first cryptocurrency exchanges appeared that allow exchanging bitcoin – Bitcoin Market and Mt.Gox, as well as a mining pool called Slush. By the end of the same year, the market capitalization of the cryptocurrency crossed the threshold of $ 1,000,000. An unpleasant event also happened – a hacker discovered a vulnerability in the code, used it and generated more than 180 billion coins. The vulnerability was soon closed and the deal canceled.

In February 2011, when the value of BTC equaled the dollar, the coin was first widely discussed in both digital and print media. The reviews were not only laudatory, but also condemning, and this negatively affected the course. In June 2011, the Mt.Gox exchange was hacked, as a result of which tens of thousands of accounts were affected. But interest in cryptocurrency still persisted.

At this point, altcoins began to appear, trying to eliminate certain disadvantages of Bitcoin. Some were successful – for example, Litecoin has been consistently among the top ten cryptocurrencies for several years.

In 2013, Bitcoin was already considered a recognizable project. Events of varying degrees of importance constantly took place around him. In particular, this is the bankruptcy and the closure of the Mt.Gox exchange

With the growth of the rate, more and more dissatisfied participants appeared: after all, the number of miners increased, and as a result, commissions grew, blocks were processed longer. In this regard, enthusiasts achieved a hard fork, which resulted in the formation of the Bitcoin Cash coin. Nevertheless, interest in bitcoin was steadily growing, both individuals and large companies paid attention to it.

After Bitcoin’s sharp drop in November 2018, many said the coin was finished – but it is unlikely that this is the case. The course is now pretty stable. The only question is where he will go next – up or down.

How Bitcoin works

Let’s go through the main aspects of the Bitcoin cryptocurrency:

  1. To store, receive and transfer funds, you need a cryptocurrency wallet. The wallet consists of a public key (address), a private key (giving access to account management) and a balance. A public address can be compared to a login, and a private address is like a password. To send you money, the other party needs to know the public, or public address, but the private key must be kept in a safe place in strict confidence.
  2. The bitcoin wallet address is an identifier of the form 19L2ffRrriLo3ZDmwKdSXssadQJdp9g1fv. It is noteworthy that the Internet is only needed to make payments, but not to create a wallet. The process of creating a wallet is just a random generation of a password and login. There is even a chance of generating a wallet with money in the account, but it is extremely small and amounts to 1.813595 * 10 to the -62 power.
  3. The entire Bitcoin network can be described as a huge ledger that stores information about transactions. Any transaction is open for viewing by any participant. There are special sites where you can track them. for example a Blockchain explorer. The transferred amounts, like public addresses, are not confidential information. However, each transaction is securely protected with a cryptographic signature to avoid hacking.
  1. It takes about 10 minutes before a new transaction is added to the blockchain. This time is needed to establish the system’s trust in the payment. In 10 minutes, the transaction should be included in as many blocks as possible created by miners.
  2. The maximum number of Bitcoins possible is 21 million. Emissions are limited to prevent inflation. Currently, there are 17,501,550 coins in circulation, however, due to increased complexity and periodic reward cuts, the process slows down a lot over time. According to calculations, all bitcoins will be in circulation only by 2140.
  3. The smallest unit that Bitcoin can be divided into is satoshi, one hundred millionth part. Named after the creator of the cryptocurrency.

Advantages and disadvantages of bitcoin

Pros of Bitcoin:

✅  Anonymity.

✅  Decentralization.

✅  Lack of a single issuing center.

✅  Lack of government regulation.

✅  The system is peer-to-peer, that is, all participants have equal rights.

✅  Low entry threshold, you can start by buying 10-20 thousand satoshi.

✅  Recognition, pioneer status.

Cons:

❌ High complexity of mining.

❌ An overgrown blockchain, which is already problematic to download to a computer during the installation of the wallet.

❌ Smart contracts are not officially supported, their functionality has been reduced.

❌ The course is highly dependent on the background information.

❌  Wary attitude of the state.

❌ High volatility.

❌ There is no information about the creator, except for his nickname. But, this is most likely a plus.

Judging by the popularity of the Bitcoin coin, the pros still outweigh the cons in the eyes of crypto enthusiasts.

Bitcoin wallets

It is not recommended to store mined or purchased coins on the exchange account due to high security risks. It is better to choose one of the available Bitcoin wallet options:

  1. Program. Keys are not transmitted to the Internet, but are stored on the user’s hard drive. The participant himself sets the security level settings. There are two types of software wallets: thick and thin. Tolstoy downloads the entire blockchain to a PC and periodically updates it. Provides a high level of security, but requires a lot of free disk space, plus 2-3 days of continuous network connection for synchronization. Thin downloads only the data that is currently needed from third-party resources, which reduces the degree of security.
  2. Online. It does not require installing any applications, it is accessible from any device with a browser and Internet access. Due to their ease of use, online wallets are very popular, however, it is not recommended to store large amounts there. The option is suitable for withdrawing small amounts, for example, from taps or casinos, in order to subsequently transfer them to a more reliable wallet.
  3. Mobile. Smartphone applications are not full-fledged wallets, but they also have useful functions. For example, payment for purchases via NFC or QR code.
  4. Hardware crypto wallet. A small device resembling a USB stick that stores access keys. One of the best options for the combination of safety and convenience. Manufacturers: Ledger, Trezor and others.
  5. Paper. Like hardware, it provides cold storage (without network access). To create a paper wallet, you just need to print the secret key on a sheet and put it away in a safe place. There are many resources on the Internet now that help generate a paper wallet.

Private keys and bitcoin address (public)

The public and private keys of bitcoin play an important role in the system. Let’s carry out their comparative analysis.



                         Private (closed)                              Public (open)
PurposeAllows you to access and manage the balance, plays the role of a password. Serves as the basis for generating a digital signatureServes as an address to which funds are sent, as well as a login to enter the system
AppearanceIn HEX format: 64 characters – numbers and part of the letters of the Latin alphabet (from A to F). More often found in the “base58” format: 52 characters, starting with “K” or “L”.In the “base58” format: a combination of up to 34 characters (numbers, Latin letters, except for letters o, O, I, i). If there are zeros at the beginning of the address, they can be omitted. Usually starts with 1 or 3.
Storage methodAvailable only to the owner, must be kept in complete confidentialityIn the public domain. Can be freely transferred to third parties or indicated as payment details on various resources
Method of obtainingCreated by the private key generator at the time of wallet registrationIt is generated based on the private key using the hashing method
Security levelIt is impossible to find out programmatically. Stored exclusively by the user.It is possible to find out from the blockchain register or find out using a private key

An example of public and private keys in different formats:

Bitcoin network fees

Commissions in the Bitcoin system play a very important role. Since there is no control center, the fees go not to the developers, but to the miners. This is an additional reward for them for forming blocks.

When the user creates a transaction, it will only go through after it has been included in the block. It is arranged so that transactions with the highest commissions become priority, because they will bring more benefits to miners. In the bitcoin network, fees can be adjusted by specifying the desired amount of deductions. An underestimated commission can lead to the fact that the transaction freezes and will never be included in the block.

If you want your payment to go through as quickly as possible, then it makes sense not just to overestimate the commission (after all, there is a possibility of overpaying too much), but to go to one of the special sites that display and analyze the state of the mempool (mempool is a queue of transactions). Depending on the current congestion of the network, the service calculates what commission is most reasonable to set at the current moment so that the payment is not delayed.

The actual fees and the estimated time for the transaction to enter the next block can be viewed at bitcoinfees.earn.com. The optimal size is indicated in green. In the screenshot, the fastest confirmation by miners will occur at a commission of 14 satoshi per byte or 0.00000014 BTC. At the rate on 01/31/2019, this equals $ 0.00049. The size of payments to miners has been declining throughout 2018. In late 2017 – early 2018, fees were $ 10-30 or more.

What is Satoshi

Satoshi (Satoshi) is 1 / 100,000,000 share of bitcoin. Any currency needs a bargaining chip to make it more convenient to use. The following measuring system has been compiled for BTC:

  • 100 satoshi = 1 µBTC = 0.000001 bitcoin
  • 100,000 satoshi = 1 mBTC = 0.001 bitcoin
  • 100,000,000 Satoshi = 1 BTC

In which countries is bitcoin allowed, status in Russia

Ten countries where free use of Bitcoin as a means of payment is allowed:

  1. Japan
  2. Singapore
  3. Belarus
  4. USA
  5. Great Britain
  6. Sweden
  7. Canada
  8. Denmark
  9. Germany
  10. Australia.

In addition, the segment is developing quite well in the Czech Republic and other European countries. And in Venezuela, they created their own state cryptocurrency.

As for the Russian Federation, discussions about Bitcoin do not stop – it is in no way possible to give it a specific legal status. Officials are mostly against the adoption of cryptocurrencies, calling them “a surrogate for money.” However, V.V. Putin believes that if there is demand, then the sphere needs to be properly regulated. However, the ruble still remains the only official payment instrument in the country.

How bitcoin is secured

Bitcoin is not controlled by anyone, is not associated with any state economic structure and has no physical embodiment. However, this does not prevent its price from growing and being measured in thousands of dollars. It follows from this that the cost of bitcoin is provided primarily by demand and popularity, as well as by the technological mechanisms that underlie it (in particular, the high cost of mining).

Many do not trust cryptocurrencies for the reason that they are not backed by gold reserves, mistakenly believing that fiat money is backed by them. In fact, most countries have already abandoned the gold standard.

What are Bitcoin forks

  • Fork from English translates as “fork” or “branch”. Cryptocurrency forks are divided into two types:
  • Soft fork. It is a non-critical update that is compatible with the current blockchain protocol.

Hard fork. This is an update, the rules of which cannot be combined with the current software in any way.

In the Bitcoin network, hard forks are carried out by increasing the block size, when the nodes that make up the system upgrade the software to comply with the new rules. If the change is not made, then the nodes using different software will not be able to adequately perceive the same information. In this case, the blockchain is divided into two independent parts. All operations that were carried out in the original network become invalid for the second one.

Over the 10 years of the existence of the Bitcoin blockchain, such forks have happened several times, but they did not always end with the formation of a new coin. In the summer of 2017, the Segwit soft fork was successfully activated, and almost at the same time, a hard fork occurred, which resulted in the emergence of the Bitcoin Cash coin.

All Bitcoin forks until today:

Investments in bitcoin, prospects.

Forecasts for investing in cryptocurrency Bitcoin range from positive to sharply negative. Optimists cite as an example the gradual adoption of cryptocurrency in countries around the world – for example, in the United States, a law is under consideration, according to which digital money is actually equated to fiat money. In addition, due to the limited emission, the BTC rate promises to grow, despite the fluctuations associated with the information background.

Pessimists point out that the project behaves like a “bubble”, and all of its popularity is based solely on the speculative actions of exchange players. They also believe that one should not particularly count on the world acceptance of the currency in the next 5-10 years, since it will not be beneficial for the authorities in any country.

And yet, most experts are convinced that one should expect a sharp jump from Bitcoin in 2019-2020. This means that cryptocurrency is still a promising investment tool.

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