What is Bitcoin? An explanation for beginners with its advantages and disadvantages . You must have heard the comments of celebrities in various economic fields about the necessity of investing in Bitcoin. That is why it is wise to get more information. In this article we will learn about this digital currency and answer the question “What is Bitcoin and how do you collect it?” But let us explain to you clearly and in simple language to answer this question, and follow the article with us for the next.
According to many people, 2022 was a year filled with controversy over cryptocurrencies. This year, with the economic crises taking place in Arab countries, including Egypt, many faced financial problems or became unemployed, but Bitcoin owners had a year full of good and exciting news. Over the past years, the price of Bitcoin has risen to more than $40,000. This event shows that investing in this digital currency in the long term can be a smart and profitable move.
The best cryptocurrency trading platforms in Egypt
Bitcoin currency history
Cryptocurrency Bitcoin is a cryptocurrency that was created in 2008 by an unknown person or group under the pseudonym Satoshi Nakamoto.
Bitcoin began to be used in 2009 with the release of open source software by Satoshi. This digital currency caught the attention of many people in 2018 with a record amount of $13,000.
What is Bitcoin?
Bitcoin, in simple words, is a decentralized digital currency that is not supervised by a manager such as a central bank. In the Bitcoin network, users can trade peer-to-peer with each other without the need for a middleman or central institution. All transactions are recorded and stored in a distributed public ledger called the “Blockchain”.
Many people consider digital currency to be equivalent to Bitcoin. While this is not the case, Bitcoin is the number one, most valuable, most influential and most important digital currency. Bitcoin is the first cryptocurrency created and after that many digital currencies entered the cryptocurrency world.
Bitcoin is a virtual currency. Simply put, it is a computer program that enables people to exchange monetary value directly with each other. Bitcoin is the first crypto commodity, based on the Blockchain ecosystem, that can exchange digital currencies between people like secured cash. Bitcoin trading is anonymous without any interference from brokers and brokers. Why is bitcoin so expensive?
Who is Satoshi Nakamoto ?
Satoshi Nakamoto is an anonymous name used by the person or person who created the bitcoin.
There are only 21 million bitcoins in the world, so this amount of digital currency can be used effectively and efficiently in commercial transactions, and each unit is broken down into smaller pieces.
Do you know what is the smallest unit of Bitcoin? The smallest unit of a bitcoin is called a satoshi and each bitcoin is divided into eight decimal places (100 million of one bitcoin).
Every 0.00000001 bitcoin is called a Satoshi in the global economy in honor of the founder of bitcoin, Satoshi Nakamoto .
What is Blockchain Technology?
The basic technology of the digital currency Bitcoin is the “Blockchain.” Blockchain is essentially a group of computers (or nodes) that run Bitcoin and contain a partial or complete record of the transactions made on its network.
Each node contains the complete history of Bitcoin transactions, and is responsible for confirming or rejecting a transaction on the Bitcoin network. To do this, the node performs a series of checks to ensure that the transaction is correct. This includes making sure that the transaction contains the correct validation parameters, such as tokens that do not exceed the required length. What are the advantages and disadvantages of Bitcoin? Cryptocurrency trading
The transaction takes place only after all active parties in the Bitcoin network confirm it in the block in which the transaction is located. After confirmation, the transaction is appended to the existing blockchain and broadcast to other nodes. The blockchain acts as an anonymous record of transactions (that is, its content is visible to everyone, but it is difficult to identify the transacting parties on the network).
This is because the blockchain provides encrypted addresses to each party. Transactions are allocated in the network. It is said that even those who are not participating in the network as a node, miner or miner can watch these transactions live by looking at block probes.
The more computers (or nodes) added to the blockchain increases its stability and security. And while anyone can participate as a node in the Bitcoin network; But not all of them are miners, as long as they have enough storage space to download the entire blockchain and its transaction history.
Bitcoin digital currency
The underlying technology of digital bitcoin, as mentioned, is blockchain technology, which is a type of digital ledger. Since it is digital money, you do not have physical access to it, but you own it through your private key. With the private key, you can use bitcoins, so be sure to store the private key in a safe place. In short, you own your bitcoin in the form of a set of unique private keys like a password.
Moreover, Bitcoin is not in print. It is completely independent and is not under the control of any financial institution, bank or jurisdiction. In addition, due to anonymity, transaction details or user details are not logged.
Transactions are formed through a process called bitcoin mining. Simply put, mining is the multiplication method. In the mining method, computational algorithms become part of a difficult mathematical puzzle. Therefore when the puzzle is solved, the mining block is mined and the user or developer gets a reward. That prize is one bitcoin.
In order to mine bitcoin, a user must create a bitcoin account, which is a bit like a computer email with 27-34 characters and words.
The maximum supply of Bitcoin is 21 million coins and the current circulating supply of Bitcoin is 18.87 million coins. Bitcoin is traded on 755 markets and 92 exchanges or exchanges, with the most popular platform being Binance. Bitcoin (BTC) runs on its own blockchain and can be multiplied. The current Bitcoin share of the total cryptocurrency market is 41.10% and its market capitalization is $1.20 trillion. What is Bitcoin and how can you collect it? Cryptocurrency
Advantages and disadvantages of the digital currency Bitcoin
Advantages of digital bitcoin
The advantage of bitcoin cannot be summed up in a paragraph or a few sentences. Bitcoin, as the first and most valuable digital currency, has a whole range of innovation, cost reduction, breaking the traditional rules of money, eliminating the control of the powerful and rule-breaking, that introduced these things to the people of the world.
The advantages of Bitcoin are:
1- Bitcoin is based on the Blockchain network. Due to the large number of users and the vast network and the impossibility of changing the previously recorded data, this network provides a secure and convenient environment for recording and preserving information and is virtually impenetrable.
2- On the other hand, unlike the traditional financial and payment systems that are currently among the people, the use of Bitcoin is decentralized without the need for the intervention of a central institution such as the government or the central bank, and for this reason, no one can monitor or restrict Bitcoin transactions.
3- Bitcoin will be very useful and effective for countries facing economic sanctions because with the help of this digital currency, the restrictions caused by sanctions can easily be neutralized.
4- In addition to electronic and hot wallets, it is also possible to store digital bitcoin in offline hardware wallets, which is called cold storage. In cold storage mode, the probability of wallet hacking and cryptocurrency theft is zero.
5- In the Bitcoin Blockchain system, a faster and cheaper payment system is offered to the whole world because there is no middleman in the transactions.
6- Given that Bitcoin is not backed by any government or bank, it can be exchanged for traditional currencies.
?What are the disadvantages of digital bitcoin?
What are the advantages and disadvantages of Bitcoin? Cryptocurrency trading
1- One of the drawbacks that can be attributed to Bitcoin is the unknown nature of this digital currency. The emergence of this currency has left many governments unable to determine the best response to Bitcoin. Currently, many countries have started to deal with Bitcoin; While some are also trying to get maximum benefit from this digital currency and its capabilities.
2- Long Transaction Time: It takes about 10-20 minutes to complete transactions in the Bitcoin network. This period of time is very small and negligible compared to the period of time that should be spent to complete a transaction in the current banking system (fiat currencies); But today, cryptocurrencies have been introduced into the market which can perform a larger number of transactions in a shorter period of time; That is why, nowadays, the advantage of transaction time on the Bitcoin cryptocurrency platform is of relative quality and is important.
3- Bitcoin is a competitor to government currencies; In addition, they can be used for black market transactions, money laundering and illegal activities; As a result, governments may prohibit the use and sale of Bitcoin by making laws.
4- High Volatility: Unfortunately, cryptocurrencies show extreme price fluctuations. This feature made investing in bitcoin high risk in the short term. For example, in 2014, the price of bitcoin fell by 80% in one day.
5- High energy consumption when mining the digital currency by miners
6- Cryptocurrency exchanges are completely virtual, like other virtual systems, they are threatened by hackers, malware and operational errors. And bitcoin holders, if they keep their assets in cold wallets or in hardware wallets, can get rid of the risk of hacker attack.
7- Given that all Bitcoin transactions are permanent and irreversible, any mistake or theft can become a problem; Because in the Bitcoin network, a transaction can only be reversed if the person who received the digital currency returns it again.
Where do you buy bitcoin?
Bitcoin or other digital currencies are available on markets called cryptocurrency exchanges or cryptocurrency exchanges. These trading platforms can help you buy and sell bitcoins. It includes some popular cryptocurrency exchanges like Coinbase, Binance, etc. These companies store coins in digital wallets, just like a virtual bank account.
Why buy bitcoin?
Bitcoin is the largest cryptocurrency in the world. More and more companies are accepting bitcoin as a payment method to power the crypto world. And in the future, we may see a world where Bitcoin will be the standard digital currency.
Who uses Bitcoin?
Anyone can use, buy and sell bitcoin through cryptocurrency trading platforms and apps. And buying bitcoin from our point of view at the moment is not possible for everyone due to its high price, but don't worry, you can buy a share of Satoshi. As mentioned earlier, there are small units of Bitcoin, such as Satoshi, (named after the founder of the first cryptocurrency) that you can buy. One satoshi is equal to 0.00000001 bitcoin.
Why is Bitcoin not widely used?
Despite the rise and spread of digital currencies, especially bitcoin, among people since the beginning of its inception until now, many institutions, experts, and merchants are generally skeptical about digital currencies. Cryptocurrencies have been considered an alternative to fiat money, but this has not yet happened. While some banks and financial services companies get into it, others shy away from it, seeing it as unstable and volatile, which is absolutely true, and the cryptocurrency market is subject to extreme volatility, and on the other hand, this market is heavily influenced by the talk that celebrities create .
People like Elon Musk use Twitter to influence the value of digital currencies, causing their prices to rise and fall. For example, when Elon Musk announced that his electric car company Tesla had invested $1.5 billion (€1.2 billion) in bitcoin and that the company had begun accepting bitcoin as payment, these actions boosted the bitcoin price. He was assisted by Kevin O'Leary. However, Elon Musk reversed course only a short time later and claimed that Tesla would stop accepting bitcoin due to the potential environmental damage that could result from bitcoin mining. This announcement caused bitcoin to drop below $50,000 (42,000 euros).
Therefore, cryptocurrencies are heavily influenced by the social networks of people who are big, powerful, rich and have a lot of power and money like Elon Musk.
What is mining or mining in digital currencies?
EXTRACTION AND MINING
Mining is a distributed consensus system used to validate pending transactions by including them in the block chain and enforce a chronological order in the block chain, protecting network neutrality and allowing different computers to agree on the state of the system. For the network to be verified and function properly, transactions must be linked into a block that conforms to very strict cryptographic rules and is verified by the network.
These rules prevent previous blocks from being modified because doing so will invalidate all subsequent blocks. Mining is also equivalent to a first-come-first-served lottery, which creates competition and prevents the easy addition of new cascading blocks to the blockchain. As such, no group or individual can control what is included in the block chain or replace parts of the block chain.
Bitcoin Proof of Work Algorithm
Proof of Work or Proof of Work is a consensus mechanism by which miners contribute to the network by mining digital currency and making money for themselves. Digital Bitcoin is also one of the cryptocurrencies that use this algorithm. This algorithm can be described as follows: Blockchain provides miners with very difficult puzzles. Miners have to solve these puzzles so that they can then add the solved nodes to the blocks and eventually the block chain is solved.
After every 210,000 blocks mined, or approximately every four years, the block reward given to Bitcoin miners for processing transactions is halved. This is called hawing. This halves the rate of new bitcoin issuance. This is how bitcoin uses artificial inflation, which halves every four years until all bitcoins in circulation are released.
The halving system will continue until about the year 2140. At this point, miners will receive a transaction processing fee, which will be paid by network users. This fee ensures that miners remain passionate about mining and network maintenance. The idea is that competing for these costs means that there is little left after the halving ends.
This halving is important because it will produce another drop in the rate of new bitcoins and as it approaches the limited supply, the maximum total supply of bitcoins is 21 million. As of October 2022, there are about 18.85 million bitcoins in circulation, with only about 2.15 million bitcoins left to be issued through mining rewards.
And in 2009, the reward for each block in the mining chain was 50 bitcoins. After the first halving, it was 25, then 12.5, then on May 11, 2020, it was 6.25 bitcoins per block. To put this in another context, imagine if the amount of gold mined from the earth halves every four years, and if the value of gold depends on its scarcity, gold production is “halved” every four years and, in price theory, raising it.
As mentioned, this event will reduce the rate of bitcoin inflation and the rate of entry of new bitcoins in half. The previous two halves were associated with severe booms and busts that ended in higher prices than before the event. Bitcoin halved on May 11, 2020, around 3 pm.
What is the best way to invest in Bitcoin?
Considering the inherent characteristics of the digital bitcoin such as being limited, efficient, valid, not limited by geographic location, etc., this currency can be a suitable alternative to gold. Because of this, many consider this digital currency a good investment option.
You may also be looking for the answer to the question, what is the best way to invest in bitcoin? It is necessary to say that not all those who own bitcoins have obtained their digital currency through mining operations. Instead, most of them bought their bitcoins from a cryptocurrency exchange in order to make a profit by selling their coins at the right time on online exchanges or making transactions around the world.
Is it Possible to Predict the Future of Bitcoin?
Nobody knows what will happen to Bitcoin in the future. Some countries have declared that this digital currency is illegal and are setting defensive policies and laws for it, such as some Arab countries, the Republic of Egypt and the Kingdom of Saudi Arabia. Some countries like Japan and Australia want to make the most of the opportunities this digital currency offers by reviewing their laws; But many experts and economists have a positive opinion about the future of digital currencies, especially bitcoin.
What do we need to know to use Bitcoin?
In order to use bitcoin, it is not necessary to know the technical details of the bitcoin network and exactly how this digital currency works. And to make use of digital bitcoin, just install a bitcoin wallet on your phone or computer; This way you will have created your first Bitcoin address.
Create more addresses as needed. You can give your bitcoin address to your friends so that they can exchange coins with you; Simply put, working with Bitcoin is a lot like working with email, except that Bitcoin addresses can only be used once.
After all the explanations given about Bitcoin, it is better to conclude by saying that Bitcoin and other digital currencies are tools for faster and cheaper transactions. Individuals and countries determine whether digital currencies are beneficial or harmful through their use of this type of currency. And what is certain is that Bitcoin has a high potential for investment, expansion of financial and social well-being, etc.