The Beginner’s Guide To Bitcoin

Kataryna Kovtun April 9, 2020

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What is Bitcoin in simple words?

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It is a new generation of decentralized digital currency, created and working only on the Internet network. It is not controlled, the currency emission occurs through the work of millions of computers around the world with the use of the program for the calculation of mathematical algorithms. This is exactly the essence of Bitcoin.

How does Bitcoin work?

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Bitcoin is based on an extensive public database called a blockchain. All confirmed transactions in the network are included in the so-called “blocks”. When a block enters the system, it is verified and becomes part of a peer-to-peer network (P2P). Thus, each user has information about each transaction, which helps prevent theft and double spending of funds, in which someone conducts the same transaction twice. This process provides user confidence in the system.

Where does Bitcoin come from?

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Initially, Bitcoin appeared through mining. Mining is a process that ensures the security of the Bitcoin system by chronologically adding new transactions (or blocks) to the blockchain. Blocks are added when the codes are decrypted, the transaction is completed, and bitcoins are transferred or exchanged. Also, miners can generate new bitcoins using special software for solving cryptographic tasks. This provides a reasonable way to issue currency and also motivates users to mine.

Why do you need Bitcoin?

With Bitcoin, you can make transactions — pay for purchases, receive transfers and exchange it for cash. For transactions, a special address is used, encrypted with a 16-character key. The buyer decodes the code to transfer bitcoins to the specified address.

What are its differences from traditional electronic money, such as WebMoney, PayPal, GlobalMoney?

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For bitcoins, you can also buy anything on the Internet, like for dollars or euros, and it is also traded on exchanges. Decentralization is the most important difference between bitcoin and all other forms of money. No institution in the world controls bitcoin.

Who created Bitcoin?

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The program developer calls himself Satoshi Nakamoto, he proposed an electronic payment system based on mathematical calculations. The idea was to exchange coins without central control, in electronic form, more or less instantly and at the lowest cost. Read more about who is Satoshi Nakamoto in our article.

Is it possible to get a billion Bitcoins?

It is impossible. There is a limitation in bitcoin code: you can get a maximum of 21 million Bitcoins. At the same time, bitcoin can be divided into infinity into smaller parts. For example, one Satoshi is 0.00000001 BTC.

What is supported by Bitcoin?

National currencies were previously provided with gold or silver, now — GDP. Theoretically, you could come to any bank in the country and exchange your paper money for the equivalent in gold and vice versa. Bitcoin is not provided with anything, it is only mathematics.

Anyone anywhere in the world can run a script to extract bitcoins on their computer and feel like a central bank in miniature. The source code of the script is published in open form for everyone.

Features of transactions in the blockchain network

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  1. The irreversibility. After confirmation, the transaction cannot be cancelled. No one can intervene in the process — neither you, nor your bank, nor the president, nor Satoshi Nakamoto, nor your miner. If you send money, you send it. If you sent your money to a scammer or a hacker stole it from your computer, no one will help you.
  2. Anonymity. You get bitcoins to an address, which is a random string of about 30 characters. As a rule, it is possible to trace the flow of transactions, but the address does not have to be at least somehow connected with the real identity of the user.
  3. Speed and global reach. Transaction information is distributed online almost instantly and is confirmed in a couple of minutes. Since the whole process takes place on a global computer network, your physical location does not matter. It makes no difference whether you send bitcoin to your neighbour or someone on another continent.
  4. Security. The balance of bitcoins is fixed in a cryptographic system with a public key. Only the owner of the private key can send cryptocurrency to other addresses. Cryptography makes this scheme almost immune to hacking.
  5. Deregulation. You do not need to ask someone for permission to use cryptocurrency. It is just software that is available to everyone. By installing it, you can receive and send Bitcoins or other cryptocurrencies.

Where to buy Bitcoins?

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  • Bitcoin exchange where you can exchange “ordinary” money for bitcoins.
  • A cryptocurrency exchange where bitcoins or cash can be exchanged for another cryptocurrency. For example, you can buy, exchange or trade Bitcoin on Bitxmi.
  • An intermediary site that directly connects you with sellers who want to exchange bitcoins for money.
  • Sites where you can trade your goods or services for bitcoins.

Cryptocurrencies are called the money of the future, after a while, they may become a complete global financial system. Despite all doubts and concerns, cryptocurrencies continue to be used, and their price and demand are growing. At the same time, the volatility of cryptocurrencies makes them ideal investment tools.

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