What is Bitcoin?

Imagine being at a dinner party with friends and suddenly someone pronounces the word ‘BITCOIN’. The faces of those present, and perhaps yours too, say it all…

“Bitcoin… mmm… I don’t know what it is, but mmm… I’ve heard of it.”

Suddenly, the avant-garde guy jumps up and says: “What do you mean you don’t know what it is? Bitcoin is a crypto coin!”

And that’s when someone asks, “But what’s a kryptomonkey?”

The vanguardist (who was not so avant-garde) is sincere:

“Well, it seems to me that Bitcoin is a digital coin, or something similar…”

Most likely, in situations like this, no one could explain what a kryptomoney is, and at least half the people you’re spending the night with couldn’t even explain what a coin really is.

If you’ve found yourself in a similar situation, and you don’t want to look bad or even want to be a true avant-garde capable of explaining what Bitcoin is, what it’s for, or what the difference is between cryptomoney and a fiduciary coin without dying in the attempt, in this post we’ll clarify it for you once and for all.

Are you ready?

What is bitcoin

Bitcoin is a digital coin/cryptomoney created in January 2009 by the mysterious and pseudonymous Satoshi Nakamoto, whose identity is still unknown.

Its definition and purpose are described in the famous whitepaper, written by Nakamoto himself, who defines Bitcoin as: ‘a person-to-person electronic cash system, a form of purely peer-to-peer electronic cash that would allow online payments to be sent directly between parties without going through a financial institution.

What is a Fiat coin?

Fiat (fiduciary) money or legal tender is characterized as a currency that has no intrinsic value. In fact, since 1971, and with this controversial announcement, coins are no longer backed by the corresponding gold reserve and are simply based on a legal value guaranteed by the state and accepted by the community. Therefore, their value is generated by the relationship between supply and demand.

What is a crypto currency?

A crypto currency is a type of digital or virtual money used as an exchange medium, which uses cryptography as a means of ensuring the security of transactions.

crypto currencies is used as trust money but, unlike the latter, it has no physical counterpart, no legal tender and no government support, but is based on a distributed ledger (the famous ‘blockchain‘).

Like cash, digital currencies are accepted as a means of payment and can be used to purchase goods and services. They can be transferred between accounts and can also be redeemed for cash.

But above all, crypto currencies have been created to address the centralization, confidentiality and security problems associated with conventional currencies.

As you may have understood, bitcoin is a crypto currency, THE FIRST CYPTO CURRENCY IN HISTORY, but it is not the only digital currency.

Today there are thousands of crypto currencies on the market and, without a doubt, Bitcoin turns out to be the most popular of them all and that’s why it’s considered the digital gold.

Why Bitcoin?

Bitcoin is the first crypto currency based on a reliable and secure transaction platform, which was born in 2009 to respond to the uncertainties and gaps in trust money and financial scandals.

However, before its creation, there were other attempts to create a system for exchanging cryptos.

In fact, the first online platform for crypto-currencies dates back to the 1980s with Digicash, also based on cryptography and created to issue and exchange crypto currencies.

In the 1990s there were other attempts to create a system for exchanging crypto currencies. One example is systems such as Flooz and Beenz which, like Digicash, used the Trusted Third Party (TTP) approach (i.e. the company itself undertook to facilitate and verify transactions).

However, all these attempts failed and made it impossible to create a digital currency system.

Finally, years later, Satoshi Nakamoto, an alias used by a mysterious programmer or a group of programmers, created Bitcoin, an open source software based on a totally decentralized technology, without any control authority, which aimed to solve some of the main problems that trust money brought with it: 

• Centralization;
• Privacy;
• Lack of transparency;
• Slowness of transactions

Cryptography is used to make the network secure and allow users to gain some anonymity.

Speaking in slightly more technical terms, Bitcoin is based on a P2P (peer-to-peer) computer network with several nodes, computers that can act as clients and servers and whose task is to initiate or complete bitcoin crypto currency transactions.

It is important to know that there are no central nodes that have a control role in the transactions or in the operation of the network, since the network controls itself based on some mathematical algorithms on which the same block chain is based.

This is why there are no control bodies such as central banks or money transfer intermediaries, which ensures that the costs of using the system are actually reduced to a minimum. In addition, anyone with a device and an Internet connection can use this technology without having to open a current account.

The security and reliability of the Bitcoin is guaranteed by the “blocks” mechanism that allows verification of the transactions made by the Network nodes and by the fact that each block becomes an immutable file that cannot be modified without the approval of the other Network nodes.

Another characteristic of bitcoin is its limited availability.

In fact, at the time of its creation, Satoshi Nakamoto set a limit of 21 million Bitcoins to avoid inflationary behavior in the currency. This, today, is one of the features that increases its purchasing power.

Advantages of Bitcoin

After all this information, you may feel a little confused. So if you still haven’t understood what Bitcoin is for and what its advantages are, I’ll explain it to you below.

Bitcoin allows you to do:

• Fast pair trading
• Worldwide Payments
• Make transactions with low or no commissions

Among its main advantages are the following:

Bitcoin is Decentralized

We’ve already repeated it many times… one of the main characteristics of Bitcoin and of cryptos in general is that they are decentralized. This means that their operation is not controlled by any entity or body such as banks or governments.

Bitcoin guarantees anonymity

I don’t have to tell you… As you know, opening a bank account means entrusting this institution with all your information: addresses, phone numbers, credit history, consumer habits.

The history changes if we use Bitcoin, since every transaction made with BTC is stored in the Blockchain and the wallet we use to keep these crypto currencies is not linked to any personal information. There’s only a number that represents your public key and that doesn’t allow you to track your personal identity.

That’s why one of the main characteristics of bitcoin is anonymity.

Bitcoin is synonymous with transparency

As already mentioned, the transactions made on the Bitcoin network are stored in a public accounting book that is registered in the Blockchain and is visible to anyone who wants to access it.

This implies that all the amounts of the transactions made within the network are public, but it is not possible to know who sends those amounts to whom. In short, you can’t trace the particular property of each Bitcoin that people have within the network.

Bitcoin guarantees speed in transactions

The operations performed in the Bitcoin Blockchain are destined to be resolved in a few minutes, which guarantees an unparalleled speed of transaction execution compared to that offered by traditional banking services.

Bitcoin transactions are irreversible

Once a transaction has been made within the Bitcoin Blockchain, it cannot be cancelled.

In the Bitcoin whitepaper, Satoshi Nakamoto explains that one of the biggest problems that have arisen when creating digital coins, was the double expense. It’s a type of attack where people could use and spend the same amount of crypt coins several times.

Bitcoin’s Proof of Work blockchain is designed to prevent this type of attack and is based on the expectation of a series of confirmations, before validating a transaction, that would make this transaction irreversible.

Evolution of the bitcoin price

Bitcoin has had a very volatile trading history since it was first created in 2009.

Initially, bitcoins were traded for almost nothing.

If we think that the first transaction in history that occurred with bitcoins dates back to May 22, 2009, when a user bought a pizza paying 10,000 BTC, then equivalent to about $30.00, we can understand the magnitude of the evolution of the bitcoin price in the following years.

The first real increase in the price of BTC occurred in July 2010, when the valuation of a bitcoin went from about $ 0.0008 to $ 0.08 for a single currency…

Seven years later, on December 16, 2017, Bitcoin reached $19,786.24, its historical high. Although many thought this upward trend would last a long time, gold in the crypto currencies suffered several collapses and recoveries until the day we write, when bitcoin broke its historical high of over $23,000.

There are currently more than 18.5 million bitcoins in circulation and now the first ever cryptcoin has a market capitalization of more than $428 billion.

The philosophy behind bitcoin is based on the idea that you are the owner of your money and only you can control it, without the need to store it in the bank or use a bank account to send the money to someone else.

Now you’re probably asking yourself, “Where do I keep my bitcoins?

If you don’t know yet, you can save and store your bitcoins in a virtual wallet, also called a wallet (not a physical wallet, as in the case of the fiat wallet).

Wallets can be of various types: paper, desktop, mobile application, or device.

If you want to know which type of wallet to use to store your bitcoins safely, we recommend the Bitnovo Crypto Wallet.

This is a free app, available in App Store and Google Play Store and is the easiest and safest way to store, send, receive and manage your bitcoins. 

That’s because most of the wallets offered by exchanges don’t guarantee you the complete custody of the funds. Instead, the Bitnovo wallet (BIP39 compatible), makes you the only owner and custodian of your cryptos.