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How Are Bitcoins Defined? An Ultimate Guide to the Most Popular Cryptocurrency in the World

Author: Catherine Lysenko
10 March 2020, 13:26
Votes: 1

Bitcoin is undoubtedly the most popular and obscure cryptocurrency in the world. The history of its appearance is full of legends and guesses. However, this digital currency quickly became a reliable payment method widely used by many people around the world.

How Are Bitcoins Defined? An Ultimate Guide to the Most Popular Cryptocurrency in the World

The world found out about Bitcoin for the first time eleven years ago – in 2009. Before it was launched, there were a lot of tries to create a cryptocurrency in the digital space but almost all of them weren’t very successful, except for Ethereum. It is hard to decide which is better: Bitcoin or Ethreum?

January 3 became a crucial day because Bitcoin was released by its creator Satoshi Nakamoto. Of course, at first, this new type of currency didn’t find much support but, later, its first users started to process transactions using its software.

At the beginning of its existence, the digital coin didn’t have a stable rate, it changed a lot because of many factors. In 2010, Bitcoin’s price was finally established because users from around the globe started to make real purchases using the cryptocurrency. Although Bitcoin value was estimated at one order less than a penny, it began to gain popularity and many people saw its potential. The digital coin covered a long way of establishment, passing through different thresholds – from one penny to one cent, from one cent to one dollar and further up to its highest price of $20,000 in 2019.

How can one define Bitcoins?

Bitcoin is a digital currency based on the principle of a distributed application. It suggests that its operation is carried out using PTP (peer-to-peer) networking. Such architecture allows fast and secure transferring of Bitcoins between its users.

This digital cash is very similar to any other traditional currency but the main difference is that it exists in an all-digital space. It means that you can’t take Bitcoins as real money in your hand but, at the same time, you can buy items using this cryptocurrency.

Bitcoin’s pros and cons

Despite its high popularity and demand in the modern world, Bitcoin isn’t flawless and has both – negative and positive sides.

bitcoins defined

Among the main Bitcoin’s pros and cons at the same time, is lack of influence from such institutions as banks or other financial establishments, as well as the government. On one hand, it doesn’t ensure any kind of control. As this currency is considered as money, first of all, such exclusiveness makes it not very reliable sometimes. For example, Bitcoin owner and developers can fully change its operation principles, or make some significant alterations in the system, or simply cease its existence as a digital currency in a whole. In this case, everything depends only on a group of people who don’t take any legal responsibilities for what they do.

On the other hand, there is always a blessing in disguise. The main advantage of Bitcoin’s independence is its higher security level: the currency doesn't undergo fraudulent attacks. Notwithstanding banks' reliability, their data protection systems aren’t so effective as most of us think. Bitcoin, in its turn, has several features that prove its ultimate security:

  1. Bitcoin’s data are encrypted – it means that all information in the system is encoded.
  2. The currency has thermodynamic security – the probability of backward transactions is very small due to the amount of energy necessary for this operation.
  3. It uses Sybil resistance for nodes protection – this notion is tightly connected with another one called a true chain. To cut a long story short, a person can’t intrude into a node with a big number of peers.

Speaking about other Bitcoin’s pros, it is important to mentions the following ones:

  • The cryptocurrency has no limits in terms of time and place. BTC users can do payment operations from anywhere in the world at any time.
  • Unlike traditional money transfers, users aren’t obliged to provide their personal information in financial operations with Bitcoin. Hence it follows that third parties can’t get any information about you and it can’t be stolen.
  • Making payments with Bitcoins, users don’t need to pay high fees.
  • Sellers are protected against fraudulent actions by the system’s security.

define bitcoins

The cryptocurrency also has several disadvantages, among which are:

  • Bitcoin is quite a difficult system to understand. A person should know much in order to use it without problems.
  • Users can’t pay with the currency for all items and services. Not many companies added this payment option to their business.
  • Bitcoin is very unstable because its daily limit isn’t sufficient enough to cover the demand.
  • The Bitcoin value is affected by other cryptocurrencies.
  • BTC has many things to improve because it still has a lot of problems causing users’ inconveniences.

How does the cryptocurrency work?

Bitcoin isn’t an easy thing to understand. However, if not to go into details about its inner architecture, the operating principle is clear.

First of all, the digital currency is created on the basis of blockchain technology – a digital register which helps to store information on a variety of servers. Blockchain consists of blocks that are connected by cryptography. Here you will find more info about cryptocurrency and blockchain in betting.

That is why Bitcoin is called cryptocurrency. Blocks are records with transactions. When a person transfers BTCs to another user, this operation is added to the public record. All transactions are divided into several parts and every part is stored as separate data somewhere in the system. However, if one part changes, all others will also do. The public record saves these operations.

Blockchain data are processed on the ground of P2P technology. Users’ Bitcoins are stored under a key – a unique address of their balance. Keys are represented as rows with letters and numbers which are connected. To make it clear, it is an identifier that allows a user to transfer digital cash from a wallet.

To make all operations safe, the service uses the signature method. It means that all users have their signatures with a mathematical structure. It is used to match a user with his or her key. The crypto-signature consists of 2 important parts: signing and validating. In the first part, a user applies his or her key and, in the second one, this key is associated with the public one.

Bitcoin payment

How to use Bitcoin as a payment method?

It goes without saying that the BTC payment method is widely spread in the majority of countries around the world. Its main advantage is a fast payment speed without any delays. Of course, the crypto-cash is used mostly for purchasing digital goods rather than physical ones. So, let’s consider how the Bitcoin payment process is carried out.

To pay for something with Bitcoins, a user should enter his or her BTC wallet (a place where the digital cash is stored). It is possible to do it on both devices: a smartphone or on a personal computer. To open the wallet on a mobile phone, a person can download a special application. To initiate a transaction, a user should know the address of a person he or she sends Bitcoins to. The next steps are to enter this address into a required field ant to specify the amount of currency. The last thing is to click the “Send” button.

If you have never used the cryptocurrency but are going to try it in the nearest time, your first question obviously will be: “What can I purchase with BTC?”. You will find a lot of answers about how to spend this popular digital currency.

The majority of Bitcoin users pay for different online entertainment with it, including but not limited to services on igaming websites, online casinos, betting services (here is the list of websites where to bet on Bitcoin), etc. However, some companies in the US sell physical goods and food for Bitcoins. Just imagine: you can buy a pizza, a burger, a new pair of shoes, a car, a piece of furniture, or a gadget using Bitcoins. The number of Bitcoin-friendly services isn’t very big but they exist.

An important notion to define – Bitcoin mining

To define terminology, Bitcoin mining suggests adding new transactional processes to a chain in a chronological sequence. In other words, mining is blocks processing.

define bitcoin mining

When a person mines Bitcoins, it also means that he or she creates new BTCs. In order to do it, a person should have a very powerful software because its main goal is to solve hard mathematical tasks. Solutions lead to the creation of new Bitcoins in the system. Some miners create the cryptocurrency farms where a great many of the digital coins are produced. To understand how BTC farms look like, you can imagine a typical data center with a big number of computers.

How to define a Bitcoin miner?

A miner is a person who is involved in the addition of blocks to chains. Miners are paid for this work with Bitcoins. They make a blockchain accomplished and unchanged. As mentioned above, miners are also people who produce new cryptocurrency themselves using high-power equipment, or people who “grow” digital coins in special centers.

How to get digital cash?

Any person can buy Bitcoins on specialized services. It is better to purchase the currency on reliable exchanges. There are even classic ATMs with Bitcoins in some countries by which you can get cryptocurrency to your wallet. As a seller, you can also earn Bitcoins by implementing this payment method in your store. One of the most interesting variants to receive Bitcoins is to mine them.

Define Bitcoin futures: the price of Bitcoin

Speaking about Bitcoin, it is worth mentioning about BTC features. Features are an agreement on the digital currency value to the USA dollar. In other words, they show how many dollars one Bitcoin is estimated at. Futures trades are held from Sunday to Friday every week.

This contract allows the establishment of a certain value of Bitcoin for a specified period. Public exchanges are places where traders can see Bitcoin growth or decrease.

Is it profitable to invest in Bitcoins?

Investments in Bitcoin is an arguable question from its very beginning. Some financial experts consider this crypto-cash to be very promising, others don’t see any potential in it and show some skepticism as for its future development. Such doubts about Bitcoin are mainly the result of its sudden drops in value.

define bitcoin futures

On the other hand, this cryptocurrency is actively used around the globe for various payments. If to consider online gambling, for example, more and more casino websites add this payment option to their games. In addition to this, Bitcoin can become another good way of making and keeping assets instead of traditional money and valuable metals. The main disadvantage of investing in Bitcoin is its unstable position as a currency. Even though its price is very high sometimes, it doesn’t ensure that it will keep this level forever. Such an infusion of money will always be quite risky.

According to recent Bitcoin forecasts, the cryptocurrency can face significant growth in the nearest future. It will be the result of a big number of tradings and much demand connected with it. Experts say that two scenarios with different outcomes are still possible: Bitcoin can have a dramatic fall and can considerably grow as well. To find out more about the topic, read the most up-to-date cryptocurrency news.

FAQ: the main things you need to know about this digital currency

What is Bitcoin?

Bitcoin is a digital currency that is based on blockchain technology.

Is Bitcoin real money?

Bitcoins aren’t a physical type of money that one can have in his or her pocket. This currency exists only in the digital world. However, its users can purchase both with it: physical and digital items.

How old is Bitcoin?

Bitcoin was founded in 2009.

What defines Bitcoin price?

The main two things which influence Bitcoin value are supply and demand. Another factor is the cost of Bitcoins creation by miners.

Read more: Check out the Bitcoin resistance Level in 2020

Read more: Bitcoin price prediction 2020

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