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Bitcoin: a comprehensive review
What is Bitcoin_
Cryptocurrency
19.09.2021
Updated 28.11.2021
13:05

Bitcoin is a digital form of money created on the basis of blockchain technology. This feature allows it to be decentralized and not depend on any countries, governments, and central banks. While limited emission of the asset (the maximum number of BTC to be released is 21 million coins) contributes to a unique precedent of money which cannot be printed in addition later.

Bitcoin’s financial system is a technological platform based on the work of millions of computers of users all around the world. Any person (having initial money for investment and necessary skills for configuration) may launch a personal element of a decentralized network and receive a sufficient reward for that.

The project itself is fully secured from any third-party impact. The destruction of any part of the equipment will not result in a failure since each ‘farm’ of miners contains a copy of the blockchain that is consistent with all other copies on the devices of the rest of the users.

Historical start of Bitcoin

Bitcoin is the first cryptocurrency in history. Its launch took place in 2008, and a year later, in 2009, the first machines were already connected to its blockchain ecosystem.

Similar to how it happens now, initially, the main goal was the development and support of the platform, which allowed to store, send, and receive digital money – BTC. The project gave the world a whole new range of possibilities, including the:

The above characteristics not only predetermined the success of Bitcoin but also laid the groundwork for launching alternative cryptocurrencies – altcoins. Today the general market cost of altcoins exceeds the BTC capitalization, and their number is already calculated in thousands.

For what Bitcoin is needed

The army of Bitcoin admirers is really diverse. And everyone follows his own purpose:

Bitcoin is the same cash or electronic fiat money on cards/payment systems. And no one will prevent you from using it and will not receive a maximally simple way of monitoring your financial activity (like it is in the case with banks).

It’s hard to underestimate the universality of this type of money. Even the US dollar these days is not so convenient to use. And Bitcoin can be exchanged for any currency at any point of the world. It will even be taken as payment without any conversions into fiat.

What the value of Bitcoin is

Bitcoin is an asset possessing qualities that create value to it themselves:

Many don’t understand what contributes to such a high price of Bitcoin. Actually, it’s as plain as day: its value is formed by the trust of the cryptocurrency community. Everything works the same way as it does in any other investment field:

  1. The value of the currency is formed by people who invest their fiat money in the purchase of BTC, thus initiating the increase of investments in mining and trading from other participants.
  2. The cost of the cryptocurrency also increases from investments in equipment designed for mining.
  3. Such a parameter as the news agenda, which regularly releases thousands of positive predictions on cryptocurrency to the world, also spurs the rate.

All of these points may be identical for classical money as well. For instance, the dollar is so expensive and in demand, not because it specifically has some significant qualities. All of that is because investors trust the USA government and its stable economy. They invest in public debt, create and develop business in the US, and so on.

How BTC transactions work

The transfer of cryptocurrency in a blockchain network is not the money transfer in its classical understanding. It has nothing to do with transfers via mobile banking app or payment system.

The moment a person initiates a BTC transfer to another address, this is what happens:

That is why mining, farms, and the fixation of information in blocks are required, for which miners get paid rewards.

So, what’s blockchain? 

Blockchain is a huge database containing information about the transfers of all network users.

Its feature is that after applying new information to the system, it cannot be deleted. The only option is the hard fork with the creation of a copy of the blockchain, during which a new cryptocurrency will be created that cannot be associated with the initial cryptocurrency.

Such reliability is achieved by that each new block of the network always points to the preceding block – hash. And the process of hashing itself allows creating a unique print of incoming data, which interferes with manipulations.

How legal is Bitcoin? 

To date, Bitcoin is legal and isn’t prohibited to buy, store, and resale in most countries of the world. But it doesn’t mean that there are no limitations; they depend on the legal framework of a specific country.

Before using cryptocurrency, it’s required to attentively study the legislation of the country you are in:

Who created Bitcoin?

Nobody knows the exact personality of the Bitcoin creator. The only accurate thing is that he used to have a pseudonym, Satoshi Nakamoto. But the precise information about who he is, where he is from, and how old he is isn’t known even to those people who helped him with the network creation and corresponded with him on forums at an early stage.

According to one of the theories, Satoshi is not a single person but a group of talented programmers who work in several parts of the world.

Even if we consider he is a single person, it’s unlikely for him to be Japanese regardless of how the fictional name sounds. His level of English makes us think he’s been living in an English-speaking country – that is what almost everyone he communicated with marked out.

How new BTC units are created

Bitcoin is the currency that has limited emission (the maximum of 21 million units) where only 18,8 million tokens from it are in a free market.

Cryptocurrency does not appear in any other way but is created by mining. The mining itself is a mechanism of blockchain functioning and adding data about the transaction to its structure. All participants of this process receive their share of cryptocurrency for this activity.

How is Bitcoin mining limited?

Even though most of BTC currency has been mined already, it will take more than 100 years to ‘mine’ the last unit of it. All of that is because such a procedure as halving occurs from time to time.

Each specific period, there are updates within a blockchain, and the reward for mining drops twice. And it will happen like that more than once.

Thus, it becomes possible not only to slow down the process of mining but also to increase the cost of cryptocurrency based on the growth of its scarcity. Less cryptocurrency is mined, less of it goes to the market. And the number of those who are willing to purchase it is only rising every day.

How much time does mining of one block within the Bitcoin network take? 

The Bitcoin protocol is created in such a way to constantly react to external conditions and adjust the difficulty of mining thus so that mining of one block takes about 10 minutes of real time.

This process doesn’t feature a complete accuracy, but 10 minutes is kind of a reference point for all participants of the mining process.

How to buy Bitcoin

The purchase of Bitcoin today is available more than ever before. One can obtain own wallet via app stores, such as Google Play and App Store. We shouldn’t also forget about a chance of receiving instant storage after a quick registration at an exchange.

And the easiest way to conduct the process of purchase itself is via:

What can be bought for Bitcoin?

Today the list of things that can be purchased for Bitcoin is immense. The only question is whether the deal will be prohibited by the country or not, which strives to provide for the monopoly for its currency. On the other hand, no one’s stopping you from making a deal in such a way as if it was concluded with the use of classical money.

But there’s an even easier option: to do shopping on online websites registered in other countries. The essential thing is that there should be delivery to your location. According to reviews on specialized forums, crypto enthusiasts often and without any issues purchase:

  1. Airplane tickets.
  2. Clothes.
  3. Food.
  4. Domestic appliances.
  5. Online subscriptions.
  6. Real estate.

But one should be careful and trust only reliable platforms with a proven reputation.

What happens if you lose your bitcoins? 

It’s better to do everything possible not to let this situation happen. Today’s status of ‘digital gold’ dictates the conditions that the use of this cryptocurrency is done at your own risk. The government cannot regulate this asset: that’s why it doesn’t take on the protection of its users.

No matter how you lost your cryptocurrency (access to the wallet was lost, there was a theft, or an error occurred during the transfer), it will be only your problem. The maximum you can expect is to get help from the platform, developers of the wallet, or service, with which this situation is connected.

Is it possible to cancel the Bitcoin transfer?

Once sending has been initiated and data about the transfer has gone to the blockchain, their changes are impossible. It means that any errors at the stage of sending cryptocurrency are fraught with the final loss of the sum.

Before sending it, you need to thoroughly check all the data and details of the wallet-recipient several times. That is the only way to minimize the chances of a negative outcome.

How to earn money using Bitcoin? 

The crypto community is conditionally divided into several subgroups of users, and each of them benefits from the interaction with Bitcoin in its own way:

  1. Miners –– invest funds into appliances and equipment to earn money on mining over the next several years after the purchase.
  2. Long-term investors (HODLers) –– purchase Bitcoin and wait several years to sell cryptocurrency at a high rate and get profits later (not worrying about large and small drops within the whole term or not checking the market at all).
  3. Short-term investors –– try to earn on rate fluctuations within several days-weeks and fix the difference of price when buying/selling.
  4. Scalpers –– make hundreds of deals a day, buy and sell Bitcoin with a view to receiving small speculative profit (content with a relatively small income, but at the same time don’t risk a lot).