Bitcoin Explained

Bitcoin (BTC) Explained

Introduction to Bitcoin (BTC)

Bitcoin is a money transfer system invented in 2009. Through a peer to peer network, it achieves a total decentralization and does not depend on any central authority. 

Bitcoin is intended to provide an alternative to online payment. 

There are 8 decimals to Bitcoin.

The software code is open-source and allows users to create payment addresses to send or receive Bitcoin.

Bitcoin can not be possessed. You can only possess a combination of numbers and letters, called Public Key, which authenticates you as the holder of ‘X’ Bitcoin in the network.

This Public Key is called address, and everyone can consult it on the public Blockchain. To access or send Bitcoin through your wallet, you need your Private Keys, another combination of numbers and letters. 

As said in the last paragraph, your Public Address can be seen by everyone on the blockchain. All the transactions are also visible. The blockchain network is relatively anonymous, but the right word is pseudonymous.

Bitcoin (BTC) Metrics

We are going to explain a few metrics we can find on the Blockchain explorer.

The explorer is a website with all the real-time information of the blockchain.

When entering on the website, you have access to different metrics:

  • Price
  • Latest Blocks
  • Latest Transactions
  • Daily Active Addresses
  • Etc.

Price

BTCUSD Chart by TradingView

Latest Blocks

These are the latest blocks that were mined on the bitcoin blockchain.

Latest Transactions

These are the latest transactions on the bitcoin blockchain.

Daily Active Addresses

This metric is essential to evaluate the activity of a blockchain. An increase in daily active addresses is fundamentally bullish.

Market Capitalization

Market capitalization, commonly called marketcap, is a measure of the market size of a coin. It is calculated by multiplying the price of an asset by its circulating supply.

Market Cap = Price * Circulating Supply

This metric is particularly useful in understanding the importance of a cryptocurrency inside the market. 

Dominance

Although this metric is not appearing on the blockchain explorer, it is one of the most fundamental metrics to understand and watch if you will invest in altcoins.

Bitcoin Dominance is the percentage of the bitcoin marketcap over the total cryptocurrency marketcap.

An increasing dominance means Bitcoin overperforms Altcoins. On the other hand, a decreasing dominance means Altcoins are overperforming Bitcoin.

Hash Rate

The Hash Rate is a unit of measurement used to quantify the mining power of a machine. At the beginning of mining (from 2009), personal computers could perform operations on the Bitcoin network. Today this is no longer the case. High-performance machines are needed to do the job.

Although the hash rate is an essential factor in mining, profitability should always be examined.

What is the use of Bitcoin (BTC)?

What strikes you when you hear about Bitcoin is the crazy increase in its price in 2017: +1.318%! 

It’s bound to make you want to throw away your significant investments and take the speculative highway. But, beyond its speculative aspect, what is the real use of this new currency?

When the 2008 financial crisis was looming, many specialists saw this project as a way of freeing themselves from the banks and states, whose responsibility was then being called into question. 

Bitcoin’s ambition was then to develop a more efficient alternative system. 

People were forced to use financial institutions to guarantee their transactions. This situation was generating too high costs and the acceptance of a certain amount of fraud. Thus Bitcoin was born.

The trust that Bitcoin holds is guaranteed by the “mining”. The term refers to people who use the computing power of their over-powered computers to validate transactions. This “proof of work” makes the blockchain forgery-proof. 

Hacking it would require more than half the power of all minors. It is difficult to estimate the cost of such an operation. Still, it is hard to imagine an individual spending a massive fortune to hack a system that would collapse in a second… and that he would no longer be able to take advantage of.

The protocol is designed not to exceed the threshold of 21 million units in circulation. This is little and much at the same time. The theoretical definition of a currency resides in its limited supply, just like Gold was before the dollar was adopted.

Who is behind Bitcoin (BTC)?

The inventor of Bitcoin is Satoshi Nakamoto. He explains his project in a white paper published in 2008. One year later, his project moves from theory to practice.

It is impossible to describe the career of the person who created Bitcoin, as it is impossible to identify him precisely since rumors are multiplying. There is a great mystery without conclusive proof between those suspected of being Satoshi Nakamoto and those who claimed to be Satoshi Nakamoto.

In 2014, Leah McGrath Goodman claimed to have discovered the identity of the creator of Bitcoin: it would be a Japanese-American man in his sixties, whose name is Dorian Satoshi Nakamoto.

Satoshi Nakamoto Bitcoin BTC
Dorian Satoshi Nakamoto

This former computer engineer had previously worked on secret projects. Although he initially confessed to being the Bitcoin creator, he later recanted, saying that he did not understand the question, thinking that he was being asked about his former activities. The case will conclude with a terse message from the “creator” himself on one of his former Internet accounts: “I’m not Dorian Nakamoto”.

Several investigators studied Satoshi’s writing and linguistics through the “Cryptography Mailing List” document claim that it is Nick Szabo. Szabo has denied being the creator of the cryptocurrency, although he is credited with creating Bitcoin’s fundamental principles.

Suspicions then turned to Craig Steven Wright, an Australian entrepreneur in his forties. The latter claims to be Satoshi Nakamoto claims confirmed by Gavin Andersen, one of the Bitcoin Foundation directors and a leading developer, a non-profit association whose mission is to standardize, protect and promote the development of the Bitcoin system.

Craight Steven Wright Bitcoin
Craight Steven Wright

Suspicions then turned to Craig Steven Wright, an Australian entrepreneur in his forties. The latter claims to be Satoshi Nakamoto claims confirmed by Gavin Andersen, one of the Bitcoin Foundation directors and a leading developer, a non-profit association whose mission is to standardize, protect and promote the development of the Bitcoin system.

However, the statements of Craig Steven Wright and Gavin Andersen are questioned by Internet users as well as by major figures in the world of cryptocurrency, such as the creator of Ethereum Vitalik Buterin.

Adding to this other more or less far-fetched hypotheses (CIA, Elon Musk, a group of researchers composed of Neal King, Vladimir Oksman and Charles Bry or the consortium of SAmsung, TOSHIba, NAKAmichi, and MOTOrola), the Satoshi Nakamoto mystery currently remains unfathomable.

What is the future of Bitcoin(BTC)?

First possible scenario: cryptocurrencies are gaining ground before disappearing in a monumental fiasco caused by the explosion of a colossal bubble. Only geeks and anti-bank activists continue to use cryptocurrencies, as it was in its early days.

The risks of cryptocurrency are immense. 

Many late investors get burned, mostly because when they invest in Bitcoin, they quickly learn that alternative cryptocurrencies exist, and they promise “get rich quick” schemes. Bitcoin is already a risky asset. Investing in altcoins can lead you to quick losses if you are not an expert in trading cryptocurrencies.

Abusive speculation marks the end of cryptocurrency.

Indeed, the speculation, the intensity of which has been frighteningly observed in 2017-2018, could start again and even intensify, triggering a massive crash. Already today, apart from hackers specializing in ransomware or traffickers who want to move capital out of traditional channels or launder dirty money, the majority of buyers of crypto-money invest in virtual currencies in the hope of selling them at a higher price to someone else, without worrying about the real value of this asset. This is called speculation.

In a second scenario, we assume that cryptocurrencies will continue to coexist with traditional currencies, governed by the major central banks, but they will not become what they were predestined.

Even if, in this scenario, cryptocurrencies remain in the shadow of traditional currencies and remain niche currencies used by geeks, it should not be forgotten that active crypto-currencies could still be successful in some areas. Thus, crypto actives could make their mark in certain sectors where they will prove very useful, particularly in finance where ICOs will continue to help raise funds and the Blockchain’s digital assets, through smart contracts, will facilitate dividend distributions and other securities transactions.

In a 3rd scenario, will crypto-currencies ever replace our current currencies? Some elements are pointing in this direction.

In this scenario, Individuals are adopting crypto-currencies. We can note that currently, ATMs are flourishing everywhere, as in the Netherlands, which can transform banknotes and coins into Bitcoin and vice versa. The Cryptocurrency Revolution seems to be well underway!

Therefore, it is quite possible that the whole population will use cryptocurrencies to pay for their purchases in everyday life. Still, they could also use Blockchain technology for all kinds of applications in everyday life, such as recording transactions and showing real estate ownership, acting as a receipt in the supermarket and saving paper, recording medical history, and so on.

Where can we get Bitcoin(BTC)?

Buying Bitcoin is not difficult. Here is our tutorial to help you explain how to buy Bitcoin on the most secure sites. We will show you how to buy, secure, store and trade Bitcoin easily.

The quickest and easiest way to buy Bitcoin is through a trading platform that allows you to purchase Bitcoin for Euros, or even for other cryptocurrencies if you already have it.

There are many different trading platforms on the market, so as not to get lost in them, here are a few tips on the main points to observe before getting started:

  • Check the reputation of the exchange online.
  • Compare the fees
  • Verify if your payment process is available on the platform
  • Check if the platform requires KYC verification.
  • Verify if the change rates are not excessive

Here is a list of platforms where you can buy your first Bitcoin:

Overall, we recommend avoiding payment by credit card. Commissions are very high (up to 10%). Bank transfer is the cheapest but slowest solution and requires a slightly longer validation process (about three days in total if you count the validation of your identity). It is also possible that your bank will block the transfer. It will then be necessary to ask you to sign a release stating that you are aware of the risks incurred for this investment.

Conclusion

The potential danger in the Bitcoin system lies mainly in the fact that they have an uncertain future. In 2140, the year of the last Bitcoin, it could be worth much more, or much less, than its current value.

Thus, speculators believe in the future of virtual currency, while others prefer to keep their distance. For those who wish to start mining or investing in Bitcoin, they are especially advised to put into play only what they are willing to lose.