Bitcoin: What is Bitcoin? Complete Guide 2021
Bitcoin : Definition
Bitcoin: How does it work?
Bitcoin: Who accepts Bitcoin?
Bitcoin: Who determines the price of Bitcoin?
We will try to understand and explain what Bitcoin is today; its characteristics, functionalities, usefulness, potential use and how it works.
Bitcoin : Definition
Etymologically, the word Bitcoin comes from the two words bit and coin;
- Bit is a unit of binary information and
- Coin designates a token.
Bitcoin is an innovative payment network and a new form of unit of value.
It is the very first virtual or cryptocurrency. Being completely virtual, Bitcoins do not exist in a physical form.
These currencies are kept on a public book to which everyone has transparent access.
In other words, Bitcoin is a crypto-active encryption that designates virtual assets stored on an electronic medium that allows a community of users to use it as a means of payment without having to resort to so-called “traditional” currencies such as the euro or the dollar.
These crypto-actives or also called cryptocurrency are neither issued nor guaranteed by banks or governments. However, they can be used to make transactions such as purchasing products and services.
Bitcoin: Why was Bitcoin created?
We remember the financial crisis of 2008 that devastated the world economy; it was called a “krash”, marked by a liquidity crisis and sometimes solvency crises at both the bank and state levels, leading to a scarcity of credit to businesses and the insolvency of many borrowing households.
The crash began with difficulties encountered by low-income American households who found themselves unable to repay the loans they had been granted for the purchase of their homes.
Following this crisis, we can point out that:
In the United States: 9 million homes foreclosed between 2009 and 2012, more than 8 million citizens lost their jobs and about 2.5 million businesses were closed.
Faced with food insecurity and the resulting income inequality, people’s confidence in banks has been severely shaken.
In Europe: Ireland is the first country on the European continent to enter recession. Its GDP fell by 3.5% and its public deficit reached 7.2% of GDP. In France, there were 800,000 more unemployed. The number of unemployed in the International Labor Office (ILO) rose from less than 2 million to nearly 2.8 million, an increase of 40% between mid-2008 and mid-2014. The unemployment rate rose from 7.3% to 10.2% of the labor force.
In Asia: The crisis has hit most of Southeast Asia and Japan, which has seen the collapse of currencies, a stock market crash and a sharp increase in private debt. Taiwan saw its currency depreciate more than 45 percent against the dollar in the space of three weeks.
This led to the so-called Great Recession, which caused property prices to fall and unemployment to rise sharply.
In other words, the financial crisis has exposed the inherent shortcomings of banks and other financial institutions.
After the financial crisis, people began to desire a new monetary system that would not have the same flaws as those with traditional currencies.
Bitcoin, this cryptographic currency, came into being about two months after the crisis. But who is behind this new form of money?
Bitcoin : Who invented BTC?
Whoever created Bitcoin wanted to promise decentralized online payment with lower transaction fees than government-issued currency.
The identity of the person(s) who created this technology remains a mystery. However, the creator chose a pseudonym: SATOSHI NAKAMOTO
Nakamoto wanted to build a digital “cash” system, working peer-to-peer, like cash while remaining discreet and totally untraceable.
In Bitcoin’s white paper, Nakamoto explains:
“What is needed is an electronic payment system based on cryptographic evidence rather than trust, allowing two consenting parties to deal directly with each other without the need for a trusted third party”.
Satoshi could be a group of people and appears for the first time on October 31, 2008 on the P2P Foundation bitcoin.org forum.
A few messages recorded in his name made it possible to continue the search from his personal account. On his profile Nakamoto claimed to be a Japanese man born on April 5, 1975; Nakamoto also mentioned his first research on crypto-money and the design of Bitcoin from 2007.
Bitcoin: How does it work?
Bitcoin is not administered by a single central authority such as a bank, it works in a decentralized way through a set of nodes.
These “nodes” form the network through which all transactions take place.
But how does this work in practice?
Bitcoin: Understanding the Bitcoin Blockchain
Bitcoin is powered by an open-source code known as blockchain.
The blockchain is a digital, shared, public ledger that supports the entire Bitcoin network. All confirmed transactions are included in the blockchain.
Each transaction is listed in a “block” that is “chained” to the code, creating a permanent record of each transaction. Blockchain technology is at the heart of more than 2,200 crypto-currencies that have followed the development of Bitcoin.
The function of the Bitcoin blockchain is to keep track of the transactions carried out on the network, while being impossible to tamper with.
The Bitcoin blockchain eliminates the need for a central control body to validate transactions (the network nodes act as validators).
The digital ledger is replicated on all the nodes of the Bitcoin network and takes the form of blocks that are linked together using a cryptographic process.
Bitcoin: understanding bitcoin mining
To obtain Bitcoins, people install and use powerful computers to perform calculations.
This is called mining. Simply put, bitcoin mining is the process of creating a new bitcoin by solving a computer puzzle. It is necessary in order to keep the record of transactions on which the bitcoin is based.
Bitcoin mining is performed by specialized computers. Those who do the mining are called miners. It is these miners who provide security and confirm Bitcoin transactions. Without Bitcoin miners, the network would be dysfunctional.
In other words, Bitcoin mining is a distributed consensus system that is used to confirm current transactions by including them in the blockchain.
Mining imposes a chronological order in the blockchain, protects network neutrality, and allows different computers to agree on the status of the system.
To be confirmed, transactions must be written in a block that meets very strict cryptographic rules that will be verified by the network.
These rules prevent previous blocks from being modified, as this would invalidate all subsequent blocks.
This is probably the most important characteristic of Bitcoin and it seems necessary to explain what decentralization is.
“Decentralization is the process of distribution and dispersion of power away from a central authority.”
The advantages of the blockchain include:
- A theoretically limited money supply,
- Lower transaction costs.
One of the ambitions of Blockchain technology when it first appeared in 2008 was to decentralize the international monetary system.
The Blockchain technology records the actions of each individual in a distributed manner over a network and thus enables large-scale coordination without a central “authority” or supervisory body.
In other words, the system operates without a central authority or a single administrator.
It is managed in a decentralized manner thanks to the consensus of all the nodes in the network. However, most of the financial and government systems that currently exist are centralized, which means that only one higher authority is responsible for their management, such as a central bank or state apparatus.
The Blockchain therefore allows decentralization, as it offers each user the opportunity to become one of the many audit processors in the network.
Bitcoin: Where do I put my Bitcoins?
In fact, we put our cryptocurrency like Bitcoin in special dedicated wallets; we call them digital wallets or “wallets”. It’s in these wallets that we store information about your crypto reserves translated into code.
This is called a crypto wallet.
A ‘wallet’ or wallet is therefore a secure digital storage process of cryptos. This ‘wallet’ is the equivalent of a bank account. It allows you to receive bitcoins and other tokens, store them, and then send them to other people.
Private and Public Keys: A Bitcoin wallet contains a public key and a private key, which work together to allow its owner to initiate and digitally sign transactions, providing proof of authorization.
To better understand how wallets work, we invite you to read our Top 10 Best Cryptocurrency Wallets for 2020.
Bitcoin: Who accepts Bitcoin?
Bitcoins as a store of value are very useful, but often, before you get them, you have to ask yourself the following question:
Who accepts Bitcoin as a method of payment today?
It can be seen that the number of sites and shops that accept Bitcoin and cryptocurrencies is constantly increasing.
According to Coinmap.org, there are nearly 15,000 places worldwide where you can purchase goods and services using Bitcoin.
An HSB survey also found that 36% of small and medium sized businesses in the U.S. accept Bitcoin.
Through these locations, you can buy cars, apartments, etc.
At Magna Numeris, we have reviewed and listed a few sites where you can spend your Bitcoin.
Among the biggest players in e-commerce we can mention Amazon, we have selected several examples for you:
ShopIfy: Shopify started accepting Bitcoin payments in November 2014, choosing at that time to offer BitPay as a payment option to its merchants. Shopify is one of the largest e-commerce platforms on the Internet.
Microsoft: the company allows the use of Bitcoin to top up your Microsoft account. Microsoft accepts the use of Bitcoin in its online Xbox Store since 2014.
AT&T: it is the first major US cell phone operator to offer its customers a payment option using cryptography such as Bitcoin.
NewEgg: Newegg is a well-known company in the crypto-community for the purchase of crypto mining equipment. They sell all kinds of hardware at all ends of the spectrum.
Bitcoin: Where to buy Bitcoin?
To be able to spend it, we first need to own Bitcoin; then we can ask ourselves how to buy Bitcoin quickly and easily?
There are services that will allow you to exchange your dollars or euros for Bitcoins or other crypto-currencies. Several platforms offer their services to enable the purchase and sale of cryptocurrencies
Coinbase: Founded in 2012, Coinbase is one of the largest and most popular platforms for buying Bitcoins in the United States. It also operates in several European countries, including France. Its easy-to-use interface is perfectly suited for the most novice users and allows them to quickly make their first purchases.
Binance: Founded in 2017, this platform allows you to buy Bitcoin. There are also nearly 200 other tokens, a very large choice of assets compared to other platforms.
Localbitcoin: Founded in June 2012 by Jeremias Kangas, LocalBitcoin is a peer-to-peer bitcoin market based in Helsinki, Finland. Its service facilitates peer-to-peer trading in local currency against Bitcoins.
eToro: Founded in 2007, this platform offers the purchase of dozens of cryptos including Bitcoin. It is one of the most widely used platforms in Europe with nearly 10 million subscribers.
It is also the case of Cartam.world which wants to offer new innovative solutions to the crypto community by offering a free P2P (peer-to-peer) marketplace dedicated to crypto users, whether beginners or veterans.
On cartam.world, you can use your crypto-currency with your own wallets to buy or sell second hand goods against cryptos and view other users’ offers through the map facilitating local meetings thanks to geolocation and also allowing more advanced searches thanks to advanced functions.
Bitcoin: Who determines the price of Bitcoin?
As we now know, Bitcoin is not issued by a central bank or supported by a government. Consequently, monetary policy, inflation rates and economic growth measures that generally influence the value of currencies such as the dollar or euro do not apply to Bitcoin.
Therefore, there is no standard or global price for Bitcoin; it depends on supply and demand in each market, i.e., the number of people who want to buy and sell it, the price and the quantity. In general, the price of Bitcoin is influenced by:
1. The supply of bitcoin and the demand of the market
2. The cost of producing a bitcoin through the mining process
3. Rewards for Bitcoin Miners for verifying transactions in the blockchain
Bitcoin ATH: All Time High
Bitcoin is highly volatile in nature; Bitcoin has experienced significant price fluctuations, over a three-month period from October 2017 to January 2018, for example, Bitcoin’s price volatility has been close to 8%.
Initially, the price of Bitcoin was low; it wasn’t until 2013 that Bitcoin began to take off. In October 2013, the price of Bitcoin was set at $123.50. It began to climb rapidly, reaching over $140 in April, and surpassed $1,000 in December of the same year.
Bitcoin: Bitcoin Price History
When the currency was first launched in 2009, it was at a value of $0.00. In 2010, the popularity of Bitcoin surged, and during the year Bitcoin’s value increased from $0.00 to $0.39 later in the year.
By February 2011, Bitcoin had reached a price of $1.00, four months later it was worth approximately $31.00. What goes up must come down, however, and by the end of 2011, Bitcoin collapsed to a value of about $2.
By the end of 2012, the price had gone from $4 at the start to about $13.
- April 2013: $100
- November 8, 2013: $1,000
- May 20, 2017: $2,000
- June 11, 2017: $3,000
- August 13, 2017: $4,000
- September 1, 2017: $5,000
- November 28, 2017: $10,000
Bitcoin: The price at 23,000 Dollars in December 2020
ATH stands for “all-time high”, i.e. exactly the highest value of all times. This term refers to the highest price reached by an asset on a given market or stock exchange, and is very often used in the context of investors in cryptosystems.
On December 17, the price of Bitcoin (BTC) reached $23,000 for the first time in history. This historic milestone comes just over two weeks after reaching its previous record.
On Thursday, December 17, at approximately 09:14 UTC, the BTC reached an astonishing $23,441.60 USD, making it a record value.
The price of bitcoin jumped more than 400% in 2020, after reaching a low of $3,600 in March.
Bitcoin is a digital currency, also known as cryptocurrency, founded in 2008 by Satoshi Nakamoto, which uses blockchain technology to facilitate instant payments.
Being stored in wallets as coinbase; Bitcoins allow its holder to buy goods and services on the Internet or in real life as to reserve to buy games on Microsoft’s Xbox or to buy computer equipment on Newegg. Has it helped you to understand how bitcoin works?
Written by Laetisia Harson, Project Manager at Magna Numeris
Cartam: Free Marketplace for Cryptocurrency Users