Bitcoin is the first ever working cryptocurrency. Bitcoin consists of two ‘main parts’. On the one hand, you have the coin itself (means of payment) and on the other hand, you have the underlying technology of the Bitcoin network, the ‘blockchain‘. With Bitcoin, payments can be made without intermediaries such as banks or credit card companies. The control of the correct number of available Bitcoins to make the transaction is done automatically by the blockchain.
So called ‘miners’ solve very complex calculations of multiple combined Bitcoin transactions. The first miner that solves the puzzle creates the next block in the blockchain. Each new block contains a reward of 12.5 bitcoins, supplemented with the paid fees of all confirmed transactions. This is the first confirmation of a transaction. With each new block, the previous block is confirmed again, because each new block is a derivative of the previous one. Often a cryptocurrency exchange requires at least six confirmations before a deposit is accepted.
The history of Bitcoin
Bitcoin was invented in 2008 by a software developer called Satoshi Nakamoto. Who Satoshi Nakamoto really is and whether this is his real name is still unknown to this day. There are people who have had e-mail contact with him/her, but it always remained anonymous. The last known contact with Satoshi Nakamoto was several years ago.
Bitcoin was invented due to the lack of trust in banks.
Banks have a great impact on the world and can influence the monetary system by means of printing money (central banks). Also ‘ordinary’ banks put extra money into circulation through the method of fractional-reserve banking. In addition, we must rely on a third-party to hold, transfer, and pay for our money. This situation is solved with the Bitcoin. Essentially, you will have the opportunity to be your own bank.
Applications of Bitcoin
Bitcoin is used as a means of payment and has become a kind of reserve currency for other cryptocurrencies (like the dollar is for global currencies) on exchanges. Bitcoin transactions have become quite expensive compared to other cryptocurrencies. Especially at times when many transactions take place, the price that has to be paid to miners can rise considerably (for example: 54 dollars).
The invention of the Bitcoin network was also the starting point for many other projects based on blockchain.
The Bitcoin protocol
The Bitcoin network utilizes the proof of work protocol.
Can you buy a part of a bitcoin?
In the beginning, the value of a Bitcoin was only worth a few dollars. Now, however, one Bitcoin can cost upwards of thousands of dollars. For many people, it is therefore no longer financially feasible to buy an entire bitcoin. Fortunately, this is not necessary!
A Bitcoin can be divided into pieces just like normal currency. But it goes much further. The smallest amount of one dollar is one cent or $0.01 . This is also too much for Bitcoin, because at a price of five-thousand dollars, that would be fifty dollars.
The smallest quantity can be 0.00000001. That is eight decimals. The smallest quantity is called a Satoshi, and is of course, named after the creator of bitcoin. At a price of five-thousand dollars per Bitcoin, one Satoshi is worth 0.00005 dollars. The Bitcoin must be worth one million before a Satoshi is worth $0.01.
This makes Bitcoin now, and in the future, very suitable to use as a means of payment. The high transaction costs and the speed are still an obstacle, but this is being worked on by a team of developers.
Where can you buy bitcoin?
Before you can buy Bitcoins you must first have a place (address) where you can save Bitcoins. This can be done on a trading platform (exchange) or a wallet, which is completely under your own control, if you can access the private keys.
You can create a wallet in different ways:
- On a cryptocurrency exchange (Binance, Bittrex, Bitfinex, etc.)
- By installing software on your computer or phone
- By purchasing a hardware wallet (Ledger Nano S or a Trezor)
- With an online wallet service
Now that you have a place where you can save Bitcoins, you can start buying Bitcoins. You can purchase Bitcoins in different places:
- On a cryptocurrency exchange
- At an online exchange service (Convert money to bitcoin, or altcoin to bitcoin)
- With a bitcoin ATM (You can find locations here: coinatmradar.com)