What Is Bitcoin? How Bitcoin And Other Cryptocurrencies Work.
In recent months, especially in the world of finance and the economy (but also on the street), they are the subject of the moment: bitcoin and cryptocurrencies. For many, it is still a complicated matter, difficult to understand, despite the fact that the media reports their price practically.
So that you can understand what the currency of the future is and how it works, we tell you the keys to the most famous cryptocurrency and we offer you, below, a quick and simple guide to know everything about these virtual currencies:
1. What Are CryptoCurrencies?
Bitcoin is a type of digital currency that is based on crypto. The reason? They employ encryption techniques, regulating the generation of currency units, and verifying their data transfer in place of a central monetary authority.
2. How do CryptoCurrency Transactions Work?
Although Cryptocurrencies are not controlled by any government, person or entity, there is something that gives them power and support. For this, there are millions of people who verify the currency and are responsible for keeping a record of transactions and security in the systems.
3. What Is BitCoin?
Bitcoin is considered the first decentralized cryptocurrency. In other words, it does not depend on any public body, authority, or financial entity. It is free and with a market value set by its investors. It was created in 2009 by Nakamoto in order to make transfers to other countries without involving a third natural or legal person. In addition, it seeks security, anonymity, and immediacy in all movements made.
It is a virtual, independent, and decentralized currency, since it is not controlled by any State, financial institution, bank, or company. It is an intangible currency, although it can be used as a means of payment just like physical money.
4. Most Important Features Of BitCoin
It is necessary to know bitcoin thoroughly before buying it and to choose the best bitcoin exchange. These are some of its characteristics :
– Free Access Anyone can participate and have access to a simple Internet connection
– Irreversible Transfers. They cannot be canceled or undone.
– Anonymity. You do not need identification to participate in the network.
– Control of Money. Use of money freely and when desired.
5. How Do CryptoCurrency Transactions Work?
Although Cryptocurrencies are not controlled by any government, person, or entity, there is something that gives them power and support. For this, there are millions of people who verify the currency and are responsible for keeping a record of transactions and security in the systems.
6. What Is Mining
Surely you have heard the term ” mining bitcoins “. Refers to a computational reversal process to process transactions, ensure network reliability or security, and keep participants in sync.
The algorithm of this ” cryto “ keeps a record of transactions over the Internet. This record is public and is shared everywhere, already known as the blockchain . The transaction chain is recorded with all the data.
Bitcoin has become the virtual currency of the time, although there are many more. Knowing what it is and what its operation guarantees us to have adequate knowledge about it.
As in other virtual currencies, bitcoin also has a series of risks that must be highlighted in order to know exactly the magnitude of this currency. To identify them, we turn again to the report of the General Directorate of Operations, Markets and Payment Systems of the Department Payment Systems of the Bank of Spain, which groups them in:
- Financing of illegal activities and / or money laundering. Due to the decentralized nature of the scheme, transfers take place directly between the payer and the beneficiary, without the need for an intermediary or administrator. This implies a difficulty in identifying and early warning of possible suspicious behavior of illegal activities.
- The fact that organized crime networks are making extensive use of emerging electronic payment systems can create a negative reputation for digital payment methods.
- Despite the fact that, in principle, any computer can actively participate in the process of creating new bitcoin units, the high computational capacity required implies that, in practice, this activity is dominated by a small group of actors.
- Possible fraudulent transactions. To the extent that the protocols on which bitcoin is based are open software developments, the implementation of its different versions does not have to occur uniformly among all users.
- Impact on price stability and on financial stability, since private trading platforms where Bitcoins can be exchanged for legal tender currencies are marked by the high volatility of prices due to speculative movements.
- From the point of view of fraud, bitcoin presents a significant weakness compared to other widespread payment methods in the online world, such as cards.