What is Bitcoin (BTC)?
Bitcoin (BTC) is a digital currency that is created (minted) and stored electronically. Unlike the euro or the dollar, Bitcoins are not physically printed or produced by central banks, but are calculated decentrally by many people around the globe using computer power. Bitcoin, like other digital currencies, is not subject to central or state control.
What is Bitcoin and how does it differ from other digital currencies?
Bitcoin can be used to purchase goods and services and to do financial market transactions. Bitcoin fulfils the same functions as conventional currencies, such as the euro or the US dollar.
However, the most important characteristic of Bitcoin is its decentralisation. The Bitcoin network is not controlled by any institutions. This means that no central bank or state can control the money supply and set the framework – the network controls itself.
Who created Bitcoin?
A software developer with the pseudonym Satoshi Nakamoto supposedly created the Bitcoin. Nevertheless, it is still unclear today whether this is a single person or a group. The unsettled identity of Satoshi Nakamoto therefore still leaves room for speculation and conspiracy theories.
How many Bitcoins are there?
The Bitcoin protocol was developed for a maximum of 21 million Bitcoins that can be mined by miners. These coins can be divided into smaller parts (the smallest part is a hundred millionth = 0.00000001 BTC) and are called Satoshi – named after the Bitcoin inventor Satoshi Nakamoto.
What is Bitcoin based on?
Bitcoin is based exclusively on mathematics. There is no institutional structure that stands behind Bitcoin and stands for its intrinsic value. People all over the world use software that follows a mathematical formula to generate bitcoins (also called mining).
The software is a open source software, which means that it is possible for anyone to understand exactly what this software does and whether it serves its purpose. Bitcoin’s underlying technology is known as Blockchain and, like Bitcoin, is currently attracting great interest from many companies, institutions and governments. Decisions in the Bitcoin network are made by the network via a consensus mechanism defined in the program code and not by a single instance.
What are the main features of Bitcoin?
1. Bitcoin has a decentralised structure
The network is not controlled by any central institution. Every computer that calculates and transfers Bitcoins is part of the network. This means that no central institution can make monetary policy decisions for the Bitcoin network or even be authorized to take Bitcoins away from users. Should the system go offline for any reason, the Bitcoins will still be retained. The entire protocol of the Bitcoin network can theoretically be stored on a hard disk or even printed out on paper.
2. Bitcoin is easy to handle
Opening an account or business account with a bank is often associated with bureaucratic hurdles. A Bitcoin account (wallet), on the other hand, can be opened by anyone without having to provide any proof.
3. Bitcoin is pseudoanonymous
Users may have multiple BTC accounts (wallets). They are not assigned any names, residential addresses or other personal information.
4 Bitcoin payments are 100% transparent.
The network stores every single transaction in the blockchain. The blockchain resembles a huge register. If someone has a public BTC address, everyone can see how many bitcoins are on this account. However, it is not possible to see who owns this BTC address. Nevertheless, many users use changing addresses and transfer only parts of Bitcoins to one address.
5. Transaction fees are low
An international bank transfer at a conventional bank is quickly expensive. At Bitcoin, it does not matter whether the recipient of the transfer is one kilometre away or several thousand kilometres.
6 Bitcoin is fast (peer-to-peer)
Bitcoin can be sent anywhere and it only takes a few minutes for the network to confirm payment. A Bitcoin transfer is made peer-to-peer, i.e. no middleman or intermediary intervenes. In contrast to bank transfers, the transaction takes place directly from A to B without any detours.