Bitcoin – the digital currency almost everyone has heard of this name many times. Many people look to bitcoin as a tool to get rich. However, not everyone knows exactly what Bitcoin is. The following article will provide you with important information about this digital currency. Read on!
What is Bitcoin?
Bitcoin (BTC) is a cryptocurrency developed and released on March 1, 2009 by Satoshi Nakamoto – this person (or organization) is still a mystery to this day. Bitcoin is traded directly on the internet environment without going through an intermediary financial institution (bank, organization, brokerage company, …).
How Bitcoin Works
BTC works based on 3 important factors:
Decentralized Network
This is the opposite term of a centralized network, instead of data being concentrated in one place, the data of a decentralized network is distributed everywhere on the internet.
For example, Google is a centralized network, all Google data is stored at a main server. When this server is down, you will not be able to find Google data on the internet.
For a decentralized network like Bitcoin, BTC’s data is everywhere, owned by many individuals and organizations (Nodes). This means that Bitcoin will never go offline unless all the servers that own the data go down.
passwordcation
During the war, radio messages were converted into ciphers to prevent information leakage. Similar to this, Bitcoin uses Blockchain to convert transaction data into cryptocurrencies. This ensures perfect security for BTC.
When the supply is limited and the demand is still large, the price of the commodity will be pushed up. BTC uses this principle to attract investors and speculators to create liquidity for the Bitcoin market.
According to the creator’s plan, the maximum supply of Bitcoin is 21 million BTC. As of April 2022, more than 19 million BTC have been mined, which means only 2 million BTC left for miners to mine.
Currently, the Bitcoin yield for each block of data mined is 6.25 BTC. Every 210,000 blocks, the amount of BTC collected will be halved, which affects the mining speed gradually. According to experts, it takes up to 120 years to mine the remaining 2 million BTC.
What is Bitcoin used for?
BTC was created for the purpose of cutting out the intermediaries in transactions, such as banks. When transferring money, the sender must go through the bank and pay a fee. However, when transacting in BTC, both the sender and receiver will not have to pay any fees.
Another reason, Bitcoin was created to solve the problem of banks holding customer transaction information. In the past decade, many banks in the world have been “disturbed” by hackers, and BTC was born to solve this problem.
Currently, more and more institutions allow customers to transact with Bitcoin. In which there are large corporations such as Microsoft, Dell, etc. In 2016, there were more than 800 ATMs in the world supporting Bitcoin withdrawal and this number is still increasing.
How to generate Bitcoins?
The supply process of Bitcoin is completely automated. All computer networks participating in the PoW mechanism act as a team of miners (nodes) and help keep the network running. There are two popular forms of Bitcoin mining today:
- Cloud mining (Using cloud technology): Miners will register to buy an intermediary Coin mining contract (Where Coin mining rig is set up and maintained). However, the cost of contracts is quite high, miners should learn and choose a reputable unit.
- HardWare mining (Mining with hardware): Contrary to using cloud technology of the middle party, miners have to buy the necessary equipment to mine Coins. These devices are: Miners, networks, facilities, etc.
With HardWare, miners can be proactive in changing mining volume, target and output. However, miners need to control the costs to maintain the mining system such as: electricity, maintenance, cash, and incurred costs..
What are the 5 special elements of Bitcoin?
Works on Blockchain Blockchain
Blockchain is the core foundation of today’s cryptocurrency projects. In particular, Bitcoin is the first platform in the application of Blockchain technology to cryptocurrencies.
Each Blockchain acts as a distributed data system and cannot be controlled by any individual or organization. The operation must be done by the whole community (nodes). Data once stored cannot be deleted or changed because it requires the consent of more than 50% of participating servers.
Example: There are currently around 9,700 public nodes running on the Bitcoin network. To change or delete data, Bitcoin’s algorithm needs to have more than 4,850 consensus nodes.
Anonymous transaction
All transactions of cryptocurrency operated by Blockchain are anonymous, Bitcoin is no exception. Therefore, the security and privacy of Bitcoin is absolute. However, the flip side of this is that holders will not be protected from being misappropriated BTC.
Can be subdivided
With traditional banknotes, you cannot split a bill into multiples. In contrast, Bitcoin can completely do this. BTC can be divided into many smaller units, namely: mBTC (milibit), µBTC, satoshi. This ensures that anyone can own Bitcoin when the value of this currency rises too high.
Can’t fake
Bitcoin does not exist in a physical form like traditional money but only exists in the internet environment. Therefore, with Blockchain technology, Bitcoin cannot be counterfeited.
It is deflationary
For traditional (legal) money, the more money is printed to use, the higher inflation will be. However, the supply of Bitcoin is limited and will not be able to create new when it hits the level. This makes Bitcoin a deflationary currency . This could be the solution to the future inflation problem.
Notes when participating in Bitcoin and virtual currency investment
For investment, speculation, participants can x100, even x1,000 times the account with Bitcoin. However, the range of fluctuations is so large that their capital can be drastically reduced.
For example: Luna coin with a peak price of more than 100 USD, considered one of the most prestigious Crypto coins, has plummeted to only 0.0009 USD each.
In addition, forms of fraud, property appropriation, money laundering through virtual money are still raging and there is no solution. Therefore, Bitcoin investment in particular and the virtual money and Crypto markets in general have not been recognized by many countries, including Vietnam.
For the above reasons, you should be careful in choosing the first channel to build a sustainable passive income source.
Conclusion
Bitcoin and other virtual currencies were created with the aim of shortening the process and saving costs for transactions. However, there are still many challenges for this type of digital asset to grow and reach the public in a transparent and clear way. Hope the article has helped you understand what Bitcoin is and what makes it so special. Follow the next article of Top10mmo.com to be able to update more interesting investment knowledge.
