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What is Bitcoin?

what is bitcoin

The question of “what is Bitcoin?” has been on people’s minds since the first days of its appearance, especially due to the number of debates it has prompted over the years. Simply put, Bitcoin is a peer-to-peer payment system used to transact with its own inherent cryptocurrency, Bitcoin, using high-end encryption and mutual support from users on the same platform. While these constituents were far from revolutionary a decade ago, their unique combination turned this cryptocoin and its underlying structure, the blockchain, into a worldwide phenomenon.

History of Bitcoin

The question of who created Bitcoin is key to getting a full historical preview, but there is just as much controversy around this as with any other aspect of the cryptocurrency. Back in 2009, a person or group of people under the pseudonym Satoshi Nakamoto released Bitcoin as what they called “an electronic cash system.” Then, in 2011, Nakamoto publicized the code for its founding structure, the blockchain, making it an open-source system.

Nevertheless, when it first came out, everyone was wondering what’s Bitcoin all about? While the public was still guessing, Satoshi Nakamoto described it as a funds transfer system intended to surpass and make redundant the numerous centralized authorities and financial institution existing so far. And with the unique features of its platform and operative functionality, there’s a firm belief that it will steadily reach its goal in due time.

The Technology Behind the Currency

As mentioned earlier, the technology propelling Bitcoin and sustaining the whole cash transfer system has a unique nature. Widely known as the Bitcoin blockchain, this platform functions on a P2P basis, in the form of a network of interconnected computers, also known as “nodes.” Each node contains the whole of this blockchain, and this version of the system is regularly updated at approximately 10-minute intervals.

Using this principle, the whole of the Bitcoin user pool gets an equal preview of the blockchain, the changes and transactions occurring in it, and thus prevents any one member of the network to go rogue. “What is Bitcoin to the blockchain?” has long been compared to “What is fuel to our cars?” However, greater insight into the technology behind the currency provides a different perspective.

In fact, the blockchain operates as a digital ledger, a book of records that notes each transaction ever made onto each of the individual instances of the ledger, i.e. every node. Thus, while it performs specific operations for the needs of this cryptocurrency, the blockchain in its essence has the capacity to uphold other structures and perform suitable functions.

How Does Bitcoin Work?

Now that you are familiar with the basic elements of this electronic cash system, it’s much easier to understand the basic processes taking place on its platform. Other than their connection type, the security provided with this system’s encryption protocol is one other key point to be made before moving onto the actual process performed here. Illustratively speaking, the workings between nodes are protected at both sender and recipient points, as well as the actual inter-process, so that no one computer can decode the information or Bitcoin addresses, track the cryptocurrency, or use it maliciously.

It is more than apparent that the questions “What is a Bitcoin?” and “How does it work?” are related to one another. Thus, explaining the cryptocoin inevitably calls upon naming the underlying structure, while all operations done on this platform are only enabled when Bitcoin is present. Ultimately touching upon the matter of the actual operations, this entire system works as a transaction processing platform, sending Bitcoins from one node to another.

For this purpose, every submitted transaction broadcasts information of its existence across the network to inform and update the blockchain ledgers across all nodes. Alternatively, they verify the transaction, with some putting in more effort to record it in the ledger’s chain of blocks, which serves as a chronological representation of all Bitcoins ever (their previous and current whereabouts).

How to Get Bitcoins

Anyone interested in owning their own piece of the cryptocurrency coin can obtain whole Bitcoin or Bitcoins, shortly marked as BTC, or Satoshis. The latter are a hundred piece of a BTC, and they can be further divided into smaller units of the currency. Any of these cryptocurrency portions can be obtained in a variety of ways.

The most straightforward way of getting BTC is by purchasing them, i.e. exchanging them for your regular, fiat currency. Such operations are nowadays performed at a number of widely popular exchange platforms, especially the best exchange sites. The only thing to bear in mind when obtaining Bitcoin this way is their exchange rate at the time of purchase.

So how do you earn Bitcoins? It’s nothing more complex than working your way to your regular paycheck. Interested Bitcoin owners and investors can earn their fair share of the cryptocurrency by working at one of the current online job platforms that offer payment in BTC. Positions range from testing and playing video games, through blogging, article writing, and editing, to any other common, often freelance position.

Ultimately, there is yet another, more rewarding way to get Bitcoins: by mining them. The substance of what is Bitcoin mining can be considered both from the point of view of the current owners of Bitcoins and those trying to obtain some through the procedure. The former needs the miners as part of the pool of nodes that have to verify each Bitcoin transaction on the blockchain. Moreover, they validate new blocks in the chain, which contains a record of the given payment. Validating a block is done by generating its unique hash, a sort of identification number known as the block’s digital fingerprint.

This operation can be rather exhaustive, both for the miner and the powerful computer—node—which is why the end result includes a “prize,” a certain amount of mined Bitcoins for the first one to validate the block.

What Is Bitcoin Used For?

Once you learn about all the ways you can obtain the cryptocurrency, all it takes is to assess which would suit you the most to own as your personal funds. In this line of thought, having Bitcoins just so you can own them is a terrible waste of such a limited resource (note that the inventor of Bitcoin, Satoshi Nakamoto, limited the creation, i.e. mining, of new Bitcoins to 21 million).

There are many ways to remedy this situation, especially in more recent times since Bitcoins started being regarded as practically equal to the fiat currencies issued by legitimate banking establishments.

What Is Bitcoin Trading?

Bitcoin trading is one way to make use of the Bitcoins you hold in your possession. Much like the regular trading operations of everyday currencies, commodities, and services, Bitcoin too can be traded on the respective platforms. While some prefer to store it in one of the various e-wallet storage solutions available nowadays as an investment, others prefer turning it into greater profit.

Thus, Bitcoin trading is essentially the practice of purchasing specific amounts of Bitcoin and holding onto them for limited time periods. This includes constant market and economic analyses in order to calculate the optimal time to trade your small cryptocurrency treasure for something else that would put you in the lead.

What Are Bitcoin Casinos?

Much like any other online casino’s payment method, Bitcoin has been widely exploited in the iGaming industry. This is largely due to its unique features, which guarantee anonymity and security, a pair that is otherwise harder to obtain at such ventures.

Bitcoin casinos are regular online casino brands whose operators have included Bitcoin as a payment method in an attempt to provide players with an improved gameplay experience. These can be BTC-exclusive or hybrid platforms, depending on whether or not they include other traditional payment methods apart from the cryptocurrency.

Adoption of BTC

The Bitcoin currency faced great resistance back when it first appeared at the end of the previous decade. Nowadays, adopting BTC transactions is as easy as ever—all you need to do is open a suitable Bitcoin account at your chosen e-wallet option and obtain the desired amount of the currency.

While it’s true that the cryptocurrency has come a long way from where it first started, there is still a trudge or two before the finish line. After all, the economic context when it first appeared was timed perfectly such that people would inevitably note its benefits.

Nevertheless, the entire system and its valuable tender are still a long way from obtaining proper legalization, despite its widespread use. The main reason for such a contradictory situation is that when it first appeared, people were able to benefit from it, but considering it hadn’t existed ever before, there were no laws permitting or prohibiting it.

Once the essence of what is Bitcoin became a more widely understood concept, governments, individual jurisdictions, private establishments, and the like started forming attitudes regarding the matter. And considering the numerous benefits of its practical use, the number of such supporters is only bound to go up.

Advantages of Using Bitcoin

  • The system offers much greater freedom in payment processing, as any two countries and their residents can transact among each other, all differences aside.
  • Anonymity is yet another advantage, one which makes the aforementioned point possible. It stems from how all Bitcoin information is stored: nodes can preview the funds, their primary and end destination, and ensure proper operations. However, no one can uncover any individual’s identity, hidden behind its encrypted address.
  • Security of this electronic cash system is another advantage. This is due to the high encryption protocol used to protect Bitcoin’s users and their transaction information, thereby preventing identity theft.
  • Decentralization is one of the main features used to promote and explain Bitcoin to prospective owners, and with due right. The lack of any central figure or governing authority brings along with it a number of additional benefits. For one, it allows owners to be completely in control of their finances, at all times. This includes all kinds of holidays, weekends, and other days when regular banking institutions are closed.
  • Bitcoin does not require any attachment to personal information, which makes the owner’s privacy all the more protected. The Bitcoin definition of user identification is nothing more than your e-wallet address.
  • Its transparency is also viewed as a benefit, which is achieved in spite of all the security and identity protection applied to the system. This is due to the fact that every separate node is able to view the blockchain—the entire ledger of transactions and mining processes since the dawn of Bitcoin in real time.

Disadvantages of Using Bitcoin

  • The major inconvenience for Bitcoin owners is its volatility, that is, the fluctuation of the Bitcoin price in relation to regular, fiat currencies or the price of gold. Decentralization of this system prevents this key breaking point, but it also results in a lack of regulatory policies. Without the backup of a financial institution, governments have been much less willing to provide suitable legal acts that would authorize a more stable use of the cryptocurrency.
  • Knowledge and information on the topic of cryptocurrencies is still rather low among the general public. Equipping employees on all the key features about Bitcoin, its functions and proper application, would take valuable time and resources. Thus, it’s a costly endeavor for any given corporation, no matter the size.
  • Some features of Bitcoin are still under development and improvement, meaning its operative procedures could change and require further training for its user base. This is bound to result in even higher costs for companies that have taken up the cryptocurrency as part of their operations.
  • Some Bitcoin background information, like the true identity of its inventor and the key motives behind the development of the cryptocurrency, are another disadvantage. People normally require greater insight into the matter before investing their time and hard-earned money into a specific cause. Thus, many are still put off of this move and reluctant to take things to the next level.
  • Due to the currency’s fluctuations and lack of stability and regulations, numerous hackers still make various attempts at scams. Some make use of Bitcoin transactions’ irreversible effects, while others turn to stealing information, keys, and funds that belong to others.

FAQ

  1.    What are the main benefits of Bitcoin gambling practices?

With the more massive expansion of Bitcoin as a cryptocurrency, online casino players and gamblers in general were able to choose from a wider array of websites. In addition to the gaming opportunities, a key benefit of online gambling with Bitcoin is the anonymity provided by the currency. Using this feature, players are able to deposit and withdraw from their chosen international platforms without any restrictions, like their country of residence or any attached fees.

  1.    When did Bitcoin start entering the mainstream as a payment method?

Once people became more aware of the existence of Bitcoin and the concept of cryptocurrencies, this payment method slowly started progressing toward the realm of mainstream options. There is still a long way to go for the cryptocurrency in legal terms, but nowadays it’s employed by numerous brands and enterprises, which boosts its credibility significantly. One of its most notable leaps toward this area was the exponential rise in value, during which the cryptocurrency reached its peak exchange rate of nearly $20,000.

  1.    What are Bitcoins’ most prominent uses in existing companies?

Bitcoins are used to pay for all kinds of goods and services nowadays. Due to its key features, some use it to make transactions on grey markets, as well as to purchase illegal substances and materials. Nevertheless, existing companies and establishments have turned it into a prominent payment method. Among these, the top ones include platforms such as Overstock, corporations such as Microsoft and the tech giant Dell, and numerous individual online job services, where individual companies pay their off-site employees in BTC.

  1.    What is Bitcoin investing, as opposed to Bitcoin trading?

Bitcoin investing is different from Bitcoin trading, explained above, in the sense that investors obtain the cryptocurrency and store it for safekeeping. Thus, they invest their current funds in this electronic cash system, in order to profit at a later date, when the currency reaches a considerably higher value.

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