What is Bitcoin and how does it actually works? Explained:

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What is Bitcoin and how does it actually works? Explained:

Casacius Bitcoins coins

Bitcoin is a decentralized, digital currency, which, simply means no banks, no governments, no borders. Bitcoin and the Bitcoin network just consist of people using Bitcoin. Awesome, right?

Now some cool facts about Bitcoin: because there is no bank, transactions go directly from person to person so fees are VERY LOW. And because everything goes via the internet, transactions are checked, verified, and finished within minutes.

The best of all: NO INFLATION. There’s a limited number of Bitcoins in the world, and that will never change. The market determines the value, but for the past few months 1 Bitcoin has been worth more than 2000 USD!! Although it is new, you can buy stuff with them in more and more websites, and even physical stores.

Pay with Bitcoins

A store that accepts Bitcoins as a payment method

Bitcoin uses the P2P protocol:

Bitcoins work through a protocol called “P2P Protocol” (also called Peer-to-Peer protocol. It is the same protocol used by torrent-type downloads and file sharing).

This means that Bitcoin works, unlike any other type of currency, in a decentralized way. All those who own Bitcoin are part, and make up the “bank” of Bitcoin, but there is no bank that manages this cryptocurrency, and this comes with several benefits. It is the same users of Bitcoin who manage it, hence it is said to function as a P2P network.

An example of the P2p protocol

An example of the P2P protocol

Where do Bitcoins come from?

With regular (let’s call it like this) PAPER MONEY: dollars, euros, pesos, you call it, you have the central bank (like the Federal Reserve, the Brazilian Central Bank, or any other Central Bank institution), and this kind of entity decides when to print and distribute money. Usually using this power in their favor.

Bitcoin does not have a central government. “Bitcoin miners” use special softwares to solve math problems (bitcoin algorithm) and are issued a certain number of bitcoins in exchange. Another interesting fact about the Bitcoin network, is that it automatically renews and update the math problems, by making them more difficult to resolve.

In the early days, Bitcoin miners solved this math problems with their regular computer processors and their computers. Soon, the first commercial Bitcoin mining products included chips that were reprogrammed for mining Bitcoin. These chips were faster, but still power-hungry. ASIC, or Application Specific Integrated Circuit, chips are designed specifically for Bitcoin mining. The so-called ASIC tech has made Bitcoin faster than ever, while using less power.

There’s one challenge for Bitcoin miners: as time goes by, Bitcoin gains more and more popularity, which makes even more difficult than it is to mine them by solving different mathematical problems.

The Bitcoin mining activity is actually really important for the whole Bitcoin network, it ensures equality and keeps the network steady and safe.

How are Bitcoins generated? Bitcoin mining:

Bitcoins are generated by mining them. A computer is given a complex mathematical problem to solve, and the goal, is a 64-digit number. If your PC can successfully solve that algorithm then congrats! You now own a certain number of Bitcoins. The network automatically adjusts the difficulty of mining, besides that, 50 Bitcoins are created roughly, every 10 minutes.

The reason is called Mining, is because there is set number of Bitcoins that can ever be mined in the system. There’s only 21 million Bitcoins that will ever be created in total.

Since the first of June (of 2017), there are already more than 16 million Bitcoins mined out of the total amount of Bitcoins available, which is 21 million.

Who created Bitcoin? Who owns Bitcoin?

The “Bitcoin team” (yes, there is a Bitcoin team) stated that no one owns Bitcoin. It is simply controlled by users all over the world. Developers continually work on the process, but essentially, the users themselves head up the phenomenon.

So, who actually created Bitcoin? Well, that’s kind of a mystery. Programmer “Satoshi Nakamoto” invented Bitcoin so that should be a clear starting off point. However, Satoshi Nakamoto does not exist. Well, it is known that he exists, but this name is only a pseudonym for a person or group of persons. Various investigations have published notes or reports online, claiming to have identified the real Satoshi Nakamoto. All of Nakamoto’s posts have been analyzed, his (or her) linguistic style, his prose, his spelling. Investigators and different journalists have investigated and analyzed all of this evidence and some came to the conclusion that there were a group of persons, not only one person, in the frame.

Satoshi Nakamoto's identity is still unknown

Satoshi Nakamoto’s identity is still unknown

Many think that the point of Bitcoin is anonymity, and that uncovering the identity of Satoshi could topple the system altogether. But no matter who is really behind the phenomenon, he really covered its tracks to keep us all guessing.

How to invest in Bitcoins?

As Bitcoin is growing in popularity more and more investors are getting interested in investing in this cryptocurrency. Also, its price has topped the 2000 USD mark in May, 2017.

Please, if you are interested in investing in Bitcoins, CONTACT US HERE.

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