Authored by @hetty-rowan
Revolution in the financial world
We cannot ignore it. Bitcoin. It is the mother of all crypto coins. The emergence of Bitcoin has led to a revolution in the financial world. And in the financial status of many people it means a big change. And it is certainly the most talked about cryptocurrency in the world. That is precisely why I am reluctant to analyze it. There are so many people with much more knowledge about cryptocurrency who unleash their analysis on Bitcoin day after day. Who am I to apply my little knowledge of cryptocurrency to that? Who am I to write another post about Bitcoin, and its origins. Don't we all know that?
At least most of the people I know from here will know that on October 31, 2008, Satoshi Nakamoto launched Bitcoin's 9-story whitepaper. That the Genesis block of Bitcoin was mined on January 3, 2009, will not be a secret for people who have studied crypto. And that the first Bitcoin transaction became a fact on January 12, 2009, will also be known. Hal Finney was then the lucky one to receive 10 bitcoin from Satoshi Nakamoto.
But because I also want to be stubborn sometimes, here is a short Bitcoin for Beginners post. Simply because it is possible, and because Bitcoin has of course dominated the crypto news in recent weeks.
What is Bitcoin actually?
In short, Bitcoin is a digital payment system that allows you to make payments without the intervention of a third party. Satoshi Nakamoto thought it was the most important fact that no third party is needed. He thought it was dangerous that in the increasing digitization of payment systems so much power was coming to lie with large third parties. And let's face it, that is of course also a development that we do not like to see.
Bitcoin solves many problems in our financial system. You can therefore see bitcoin best as a digital form of cash money: You can exchange value without the need for a third party. We call this "peer-to-peer".
Spend money twice?
If you pay with cash, it is impossible to issue a 100 note multiple times. After all, you give your 100 note to someone else, and normally don't have a copy of it on hand. Although we all know the stories of the forged paper money bills that have been, or still are, frequently in circulation.
If you start digitizing the money, this will change again. Your note is then nothing more than a few numbers, 1-0-0. It is made much easier to double those numbers with copy / paste and in theory you could spend that $100 twice. In traditional fiat systems, it is the banks and authorities that supervise this to prevent you from spending your money twice in this way. And therein lies the danger of power. Satoshi solved that problem with the design of Bitcoin.
Bitcoin does not need this third party at all. Due to the introduction of blockchain technology, it is impossible to spend your one Bitcoin multiple times.
Advantages of Blockchain technology
Fiat money has ONE central system where the currency is managed. Bitcoin has a whole network of 'bookkeepers' (nodes), who keep the administration of Bitcoin. In this way there is also insight into ALL transactions that are made, and NO ONE is in charge of the currency.
All nodes check with every transaction whether the sender has enough Bitcoin for that transaction. If so, the transaction is approved and enters the distributed ledger. And this ledger is stored on the blockchain. Every 10 minutes, a block containing the latest transactions is added to the blockchain. Once the block has been added to the chain, nothing can be changed.
How do you make a block? (mining)
It is impossible to modify the data on a blockchain. This is due to the combination of the network of nodes and the blockchain technology. They ensure that any attempt to change the blockchain immediately fails.
In a system like bitcoin you want no fake transactions to be added to the chain. How do you avoid this problem? Very simple: forced honesty.
Anyone with the right software and equipment can add blocks to the blockchain. That just costs you a lot of money. In addition to the hardware that you have to purchase, there are also energy costs for mining. You will be compensated for this.
Are you the first to mine the right block? Then you will receive a reward of 6.25 bitcoin (by the way, that reward is halved every four years) PLUS transaction costs, a kind of administration costs. So you will be paid in bitcoin. But they are really only worth money if the bitcoin network works well and is reliable. Could you add fake blocks to the chain? Then the whole idea of bitcoin is worthless and nobody wants to buy and manage bitcoins anymore.
How does a Bitcoin transaction work?
Step-by-step:
- You send bitcoin to a recipient from your wallet
- The nodes of the bitcoin network check whether you have sufficient funds. Is this the case? Then your transaction will be approved.
- The Bitcoin blockchain is updated every ten minutes. When this happens, both your balance and that of the recipient will be updated.
- Payment has been processed! The recipient has the bitcoins on his wallet.
Such a transaction is stored on the blockchain, of which all those tens of thousands of nodes have a copy. So there are tens of thousands of parties that have approved your transaction.
How do you get Bitcoins?
Basically there are three ways to get bitcoin:
- By accepting bitcoin for the sale of services and goods;
- By mining bitcoin;
- By buying them from a bitcoin owner
Of course, we also know that there are other ways to get some Bitcoin, such as faucets and the like. But I am not going to describe these ways here because at the moment, to my knowledge, they are no longer such that you can become rich.
This is very much simplified to what Bitcoin is… I didn't say Bitcoin for Beginners for nothing! And yes, I consider myself a beginner in that regard too. I may have become familiar with blogging for crypto since December 2017, it is only since this year that I have really started to become interested in the technology behind the cryptocurrency. And the many advantages!
All right then what's the Bitcoin worth right now… and at the time I'm typing this is $27,247.90.
Then we can say that Bitcoin has seen a very nice increase this year. When you consider that on January 1, 2020, the price was at $7,203.94.
Whether this increase is entirely for the benefit of Bitcoin, or also partly due to a falling dollar… we will talk about that another time.
For the time being, I would say… enjoy the increasing value of your Bitcoin, because that does not seem to end here, all experts agree on that. And of course I would very much like to agree with that ... because in the slipstream of Bitcoin, hopefully the many alts will also see a nice increase.
