Bitcoin An In-Depth Guide
We are going to explain the basic concepts to help you understand what Bitcoin is, a cryptocurrency that everyone has been talking about for some years now. This explanation will also help you to know exactly what cryptocurrencies are and how they work, so you can have a little technical notion of how it all works and what we mean by each term.
This is a guide with which we want to explain everything in the simplest possible way, trying not to resort to technicalities or words. We will start by telling you what Bitcoin is, and we will continue explaining what cryptocurrencies are in general so that you can understand it better. Then, we will tell you what is the Blockchain on which it is based, and how you can get them.
What is Bitcoin
Bitcoin is a cryptocurrency or virtual currency, specifically the first one that was developed. It is the cryptocurrency that has paved the way for all the others that came later using its technology. This technology is the blockchain, which is also used for other things.
The first of the cryptocurrencies was created “Satoshi Nakamoto”, which is the pseudonym that corresponds to a person that nobody knows exactly who is, although there have been many theories. This person published 2009 an article in which he described a P2P payment system which he called Bitcoin. After a few months, he himself published the first version of the software that allows managing the network of the currency and starts interacting with the first interested people in forums.
The total amount of bitcoins issued each year is determined by its algorithm, and the same is true for all other cryptocurrencies. Bitcoin is developed so that every four years its production is reduced by two, and so that only a total of 21 million Bitcoins are issued. After that, they will simply cease to be created.
This is a fundamental difference with conventional currencies since banks change their value at will. Therefore, currencies can be devalued, while bitcoin wants to offer a bit more stability.
What exactly is a cryptocurrency
Cryptocurrencies, also called cryptocurrencies or crypto assets, are digital medium of exchange. It can often serve the function of a currency, hence the name cryptocurrency. However, they can also be used as a financial asset, people buy them and when their value rises they sell them.
We can consider them as a decentralized alternative to digital currencies. That is, a euro or any other currency with which you pay online is organized and controlled by entities and banks. Meanwhile, cryptocurrencies are not controlled by anyone, there are simply a series of connected computers in which their movements are replicated to make it a secure method.
The value of each cryptocurrency is variable, just as if they were stock market assets, and in recent years there are a lot of changes in its value. Sometimes it rises like wildfire, and sometimes it plummets. Despite this, its value as a financial asset has gradually become its main attraction, although it can still be used as a payment method on sites that allow it.
Each cryptocurrency has its own algorithm, which manages the number of new units to be issued each year. As we have said, Bitcoin has been developed so that only a total of 21 million are issued, but each cryptocurrency will have its own algorithm determining the maximum number of units to be generated.
Finally, we emphasize that this is a totally virtual system. Just as with a euro, you can pay online or in physical format, there is no physical version of Bitcoins with which you can pay in stores. You may see pictures or images of Bitcoin coins on some sites, but they are decorations that have nothing to do with the actual product.
How cryptocurrencies work
To understand how Bitcoin and cryptocurrencies work, you must understand that they work through the Blockchain, also known as [blockchain]. It is a decentralized computer network, where each computer is a node, and these are spread all over the world. In them, exact copies of all transactions are made, so that the network is able to back itself up when saving changes.
Bitcoins are not based on servers that may be inside a company and that can be turned off. If one of the Blockchain nodes shuts down, nothing will happen, since the rest will continue to have a copy of all transactions.
In addition, the information navigates through this network of computers protected by cryptography. In addition, each block links to a previous block, as well as a date and transaction data, and by design, they are resistant to data modification. By only having information from the previous block, the nodes do not know where exactly the information comes from; each link in the chain only knows the previous one, which also improves its privacy.
Therefore, it is as if this network or blockchain were an open and public free in which all transactions made by two users are recorded. When you make a transaction, its data is recorded in a block, and it is automatically replicated in the rest. This means that the data cannot be modified or manipulated without modifying the rest of the blocks, something extremely complicated.