Bitcoin is a digital currency, also known as crypto coin or cryptocurrency. It was created in 2009 as a response to the economical crisis by one or more developers under the mysterious pseudonym “Satoshi Nakamoto”, it was designed to be independent of banks and immune to inflation.
Unlike traditional currencies, such as the Euro and the Dollar, bitcoin is based on two main principles:
- It is managed by a network of nodes, which are usually computers, forming a distributed peer-to-peer network;
- It uses cryptography to validate and secure transactions.
Nakamoto chose to mint 21 million bitcoins, thinking that the scarcity would gradually increase its value. Currently, only 18 million bitcoins have been mined.
How much is bitcoin worth?
As for most cryptocurrencies, the value of bitcoin is determined by demand and supply.
This means that its value wasn’t decided at the moment of creation, nor is it affected by inflation, the economy of a specific country or by the choices of a government or bank. It depends on how many people buy it and use it. Like any valuable asset, the more people are willing to buy it, the more its cost rises.
If tomorrow we decided to all buy bitcoin, its value would go sky-high. On the contrary, if everyone who has bitcoin tried to sell it, its price would sink.
Since it is an independent and supranational coin, anyone in the world can choose to buy it. It’s clear that this new market that it is creating is appealing, since it can become an actual global coin, like the other cryptocurrencies. From Katmandu to New York, from Naples to Oslo, people can use bitcoin and exchange it with one another.
What difference is there between Bitcoin, bitcoin and BTC?
Bitcoin usually indicates a network of nodes, of servers, that are connected to each other.
Whilst the currency is written with a “b” minuscule (bitcoin) and it is indicated with the acronym BTC on crypto-exchanges.
What is bitcoin for?
If we think about the history of man and money, cryptocurrencies are still a very young form of exchange. After all the first cryptocurrency, bitcoin, was born only in 2009.
It’s not possible to use bitcoin to shop and to pay utilities yet. The reasons are mainly these:
- Those who use bitcoin and other cryptocurrencies are still few (they call it a crypto-niche)
- This makes the price of bitcoin swing fast and unpredictably (over the last week it went from €10.000 to about €7.000)
- Many people are still suspicious of cryptocurrencies and perceive them as a scam or passing trend.
- The governments overall are late in establishing national and international laws to regulate the use of cryptocurrencies to buy everyday products (a coffee, a pair of shoes or a bus ticket, for instance).
However, some payments in bitcoin have already been made. In 2010 someone bought with 10.000 bitcoin two pizzas worth $30 in a town in Florida. In 2019 a Chinese man bought a house in Turin and the real estate agency accepted bitcoins. Also in the bar “Mani al cielo”, in Rovereto, Italy, you can pay for coffee in bitcoin.
These are sporadic cases, but they carry a very important meaning: the digital economy is landing on the real one.
So what can I do right now with bitcoin?
Financial speculation. To tell the truth, it’s a bit like the Wild West, but the regulations and laws that have been issued lately have clearly defined the security and privacy rules that the latest generation of exchanges must respect. So, gather your patience and read, learn and study as much as you can. Knowing the mechanisms of the crypto market will help you avoid scams and dangerous investments.
Investing in cryptocurrencies, and therefore making financial speculation, is a bit like gambling on the stock exchange. You have to be careful and know the factors at play. Price volatility, i.e. its fast and sudden fluctuation, is basically the phenomenon that allows traders to gain profit margins from their investment. But at the same time, just as they can earn a lot, they can also lose everything.
We will publish articles and guides on the use of the exchange, the best tool for investments in cryptocurrencies. In essence, it is an online platform where you can buy and sell cryptocurrencies. For now, we’ll just explain the main mechanism.
Today I decided to buy bitcoin. Let’s say I bought 1 for £7500.
I’m waiting for the price to rise. When it rises I sell a part of it or everything I’ve invested, to earn the difference. It can happen that the price doesn’t increase significantly for a long time or that it drops (for example to £5.000). In the latter case, if I sell, I lose the difference. In order not to lose the investment, I can try to keep all my bitcoins and wait for the price to rise, or decide to sell everything because the price could still drop.
It is always important to view cryptocurrencies as diversification of one’s investment portfolio, in which they constitute a high-risk investment.
Why do people talk of a Bitcoin Revolution?
The support of a network of thousands of computers means that the entire system of exchanges and transactions can take place without central control.
The great democratic revolution brought about by bitcoin lies therefore in the technology behind it, the Blockchain. The computers connected through a network solve very complicated algorithms to validate and allow the purchase and sale of bitcoins, or the exchange between two users. In a way, it’s as if they controlled each other, guaranteeing the transparency of every movement.
If a node attempts to hack the network to modify, falsify or manipulate data, it is immediately banned. A hacker can only tamper with the system if he can take control of 51% of the connected computers. Since these are thousands of computers, it is almost impossible.
Cryptography is the second element that makes the blockchain technology more secure than any other infrastructure. All data is encrypted, this means that to decipher information and modify it, the hacker would need a computer with a really impressive computational power. Luckily, this kind of device doesn’t exist, and even the best servers in the world would take tens of years to decode a single piece of data.