All about Bitcoin!
What is Bitcoin?
Bitcoin (symbol: ₿; abbrev: BTC or XBT) is a cryptocurrency, a form of digital money, which is encrypted and for which there digital wallets, whose emissions and value transactions are not controlled by any central identity, but rather operate in a consensual, encrypted and decentralized manner (Peer-to-Peer). These transactions are conducted by a computer network distributed throughout the world, the history of the transactions is open and transparent, and stored in a database called Blockchain. The computers that confirm the transactions and discover the new bitcoin blocks are the “miners”, these are rewarded with the transaction fees and the new blocks discovered. A limit of 21 million Bitcoins will be in circulation. Bitcoin was first introduced in October 2008 by Satoshi Nakamoto and its initial software version emerged on January 3, 2009. The first Block, called “Genesis Block” contains the following message; “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. Financially speaking, similar to gold, it can be considered a speculative asset, a cash commodity or an exchange good (cash).
Is Bitcoin legal?
Until now, Bitcoin has not been banned, however some countries restrict or limit the licensing of entities such as Bitcoin “exchanges”.
Total control over money
With Bitcoin there is no need for a reliable third party to secure payments, with the Blockchain technology all transactions are immutable and cannot be reversed once completed.
Bitcoin does not discriminate
Bitcoin is so decentralized that, no matter who uses it, the user is not obliged to reveal their identity on the network, allowing them to take part in in the global economy, even today there are millions of people without access to a bank account due to discrimination, because they do not have an identity or happen to live in places that are difficult to access. For many, it may be the possibility of saving value, having something to trade or transact safely, becoming the only way to participate in the global economy.
Bitcoin is not anonymous
Any transaction issued to Blockchain is public. Anyone can see their own balance and transactions made, but the user entity behind the address remains unknown, but there may also be information leaks, for instance the account associated with an online store/service address. Get to know monero, the anonymous and private cryptocurrency.
The price of Bitcoin is volatile
The price of bitcoin fluctuates quite often, and can reach new peaks and lows in short periods of time, it must be regarded seen as a high-risk asset, one should never invest money that cannot be lost.
Payments are irreversible
Any transaction is issued and complete is impossible to reverse, can only be refunded by the user who received the funds. It's important that you trust in whoever's sending the funds. Today, there are already services that offer consumer protection.
Unconfirmed transactions are unsafe
Unconfirmed transactions are unsafe. Transaction confirmation is an important element to know if a certain bitcoin amount has not already been used in another transaction (double-spending). Therefore, Bitcoin confirmations are an essential element to which attention must be paid. Confirmation can take a few seconds or even ninety minutes, the average is 10 minutes, this time may vary according to the network traffic or the fee paid for the transaction. Always wait for some confirmations to make sure the transaction is consummated.
Similar to any sort of money, Bitcoin should also be kept in a wallet, there are two types of wallets: Hot wallet, connected to the internet, on the smartphone, computer or online, usually often the purpose of being a current account; Cold wallet, not connected to the internet in devices, only with the purpose of keeping the balance, like a savings account, hardware wallets are the best, but it can also be a simple paper wallet which is basically the “private key” and the address of the printed “public key” wallet or a “seed phase”.
It’s very important to protect your private key because, with it, hackers can steal your funds, don’t disclose it to anyone, always keep the software wallets updated and don’t use services that jeopardize the control over your private keys.
Bitcoin mining is the process of sequentially adding blocks (the register of transactions) to the Blockchain, which is compatible with the previous block, from Block #0, Genesis Block, to the last block and where all the transactions made in the network are registered, it’s used to differentiate legitimate transactions from “double-spending” attempts. Mining is done by computers with high-processing capacity, today there are already machines built especially for this operation. These machines have special software that addresses math problems and in return obtains the transaction fees and also the Block Reward, which is the incentive to have more people mining, thus keeping the network safe, secure and stable.
Once the 21 Million Bitcoin limit is reached, these will no longer be generated and the miners will only be rewarded with transaction fees. The first blocks awarded users with 50 Bitcoins per block, but the reward falls by half every 21.000 blocks, which happened for the first time on 28 November 2012, falling to 25, you can know the next date here.
The blockchain fee, also known as the “miners fee”, is the cost involved in bitcoin transactions, which is charged to users who conduct transactions. The fee is charged to reward the miners and sustain the network.
The transaction fee is also like a tool to speed up transaction fees, since transactions are often slow due to network congestion, the lower the blockchain transaction fee, the lower the transaction priority in the Bitcoin network, if one user wants a timely transaction, then they must pay a higher fee to convince the network participants to confirm the transaction.
Lightning Network adds an extra layer to the Bitcoin blockchain, allowing users to create payment channels between them within this extra layer faster, with minimal rates. Its users conduct transactions outside the main network between them and then record them as a single transaction.
The most interesting thing about this technology is that, once widely adopted, you will not need to set up a dedicated channel to send funds to someone, it will be possible to send payments to anyone using other channels with people who happen to be already connected, the system will find the shortest path. Based on this, one day it will be possible to pay for a coffee without any fees involved.