What is Bitcoin? BASIS OF BITCOIN A TECHNOLOGICAL CURRENCY

What is Bitcoin?

 

BASIS OF BITCOIN
A TECHNOLOGICAL CURRENCY

Bitcoin definition

The Bitcoin protocol allows the maintenance of an account register for exchanging bitcoins, a form of decentralized digital currency based on this computer protocol. The purpose of the protocol is to create a global payment network, accessible to all, based on cryptographic evidence rather than reliance on a third party (such as a bank) to conduct transactions. Beyond this definition, let us see where Bitcoin comes from, how it works, and why it represents a financial innovation of magnitude (Definition of BitConseil.fr).

It uses a totally decentralized network in that it uses Peer to Peer and does not depend, in fact, on any central authority. Its code is completely open since it is Open Source, it allows a universality of the supports, but can also pose problem during the updates.
The initial application and the main innovation of the Bitcoin network is a decentralized digital money system whose unit of account is bitcoin.

Bitcoin works with software and a protocol that allows participants to issue bitcoins and manage transactions collectively and automatically. As a free protocol (open source code), it also allows interoperability of software and services that use it.

The invention of a programmable currency

Never in the history of the world has it been possible to transfer value between distant people without having to trust an intermediary, such as a bank or a government.

In 2008, an individual calling himself Satoshi Nakamoto published on a mailing list dedicated to crypto-anarchists a detailed solution to an old problem of computer science, known as the Problem of the Byzantine Generals.

Satoshi Nakamoto's solution and the system he had built to respond to it - Bitcoin - allowed for the very first time to transfer value quickly, across great distances, between two peers, without having to trust a third. The stated purpose of this cryptographic protocol was to invent a digital cash system, peer-to-peer and censorship-resistant.

To achieve this feat, the creator of the Bitcoin protocol has cleverly arranged between them several existing technologies, to create the famous "blockchain" of Bitcoin.

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AN IMMATERIAL CURRENCY

 

The possession of bitcoins can only be expressed immaterially by sequences of numbers and letters that are in a portfolio. Portfolios consist of addresses to receive bitcoins. Each wallet holds a certain amount of bitcoins that is searchable by everyone on the block chain. On the other hand, the bitcoin issue requires the private key coupled with the public key that serves as the address.

Because of their nature which is a series of numbers and letters. Many software with user interfaces exist for a multitude of media. 

A CLEAR CURRENCY

The bitcoin is decentralized, its good functioning is then entrusted to all its users. It self-regulates through exchanges on marketplaces. All the exchanges are visible on the blockchain, so that its anonymity is relative (pseudonymous).

COMMANDMENTS

 

1. The system must be decentralized, and must work in pairs. Thus the number of Bitcoin created is known in advance just like its inflation. The issue is therefore strictly limited to the number fixed in advance. The system is protected from the traditional instabilities of the fiduciary currencies: A bank or a state will not be able to influence its course by monetary creation, devaluation, destruction ...
2. It must be simple to open a Bitcoin wallet. It must be open, no proof of address or anything else. It's enough to have an internet connection and a computer that does not even have to be powerful. Bitcoin avoids the bureaucracy and the troubles that accompany it.
3. It must be anonymous. You can create as many addresses as you want without disclosing them to others. The circulation of money is therefore relatively anonymous.
4. But everything must be transparent. So anyone can look at the source code. And all network transactions are visible. Anyone can see an address and know all the receptions or cash issues of it. However, if he can not link the address to a person it remains anonymous.
5. Transaction fees are minimal. State boundaries do not exist with Bitcoin. You will not have to pay huge sums to send money to any place in the world. Indeed even for very high transactions, the price of the expenses remains minimal, moreover it is not refunded to an organism, but to the minors who contribute to the stability and the reliability of the network.

 

WE CONTINUE ?

MONETARY CREATION

Transaction blocks contain a list of end-to-end transactions. The length of the blocks grows more and more, so there are fewer and fewer bitcoins created. This goes up to 21 million as we specified above. Since November 2013, 25 bitcoins are created every 10 minutes , and this division takes place every 210,000 blocks, which roughly corresponds to four years. The figure of 21 million bitcoins
Transactions are fast. Bitcoin knows only one continent, it's the internet. It is so very fast. You can transfer money from one address to another with a single click. The transaction appears directly before being confirmed. In addition it is not possible to cancel a transaction. Once the bitcoins are sent you can not go back. This prevents it from being compatible with paypal or with traditional bank payments for the moment.

THE MINING

 

Those who get bitcoins are minors. They confirm the transactions and generate the new blocks. It is thanks to these computers that generate computing power that the system is secure. Initially, a normal computer was enough to mine bitcoins, but since its price has gone up engineers have developed specialized machines in the bitcoin mining. They are very expensive, so bitcoin mining is now reserved for people who want to invest in its value. The computing power solves a cryptographic problem called SHA-256, which is extremely hard to find but extremely simple to verify.

Once a new block is created in the blockchain, the creator is rewarded with 12.5 Bitcoins, which happens approximately every 10 minutes. It is a reward for the so-called "mining" process, which spends electricity and computing on Bitcoin network maintenance.

Bitcoin mining involves many people and specialized companies around the world and creates the core value of Bitcoin. The system automatically generates new Bitcoins and automatically regulates the speed of this process, so there is no way to get around the rules and gain bitcoins faster than by scaling up the investments in the system. mining equipment and with larger expenditures of electricity.

The block reward will be halved by 2020 and the division will continue every 4 years, until 21 million Bitcoins are generated. This means that Bitcoin has a fundamental potential for growth in its price.

The image below shows that there are more than 16 million (76% of total) Bitcoins in circulation in 2017. The image also indicates a rapid growth of their offer between the start date (2009) and 2013 , before slowing down, which means that the demand is already increasing and will continue to do so - of course, if no crypto currency competing, such as Litecoin, does not put Bitcoin out of the scene.

TRANSACTION

The security of Bitcoin lies in this principle. The block chain is taken in chronological order which prevents to spend several times the same amount. Transactions to be confirmed must be included in a block, only one confirmation is sufficient to consider the security of a transaction, but for those above $ 1000 it takes more than six confirmations. With this organization it is impossible to modify a previous block and nobody can control or falsify the network. You can not do computer-to-computer transactions without going through the internet and the Bitcoin network.

CRYPTOGRAPHY

All bitcoins contain the public key of its owner. In order for a bitcoin to be transmitted from one user to another, the first must put the public address of the recipient and sign with his own private key. This key is hard to find and easy to prove. So that there can not be falsification all these operations are public, except obviously, the private keys.

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HOW TO START?

You must first own a portfolio. You can choose one by using our comparison or on bitcoin.org You can also see bitcoin conservation techniques.

Then you will have to get bitcoins, for this you can visit our page buy bitcoins or go directly to our page get corners. You can get some for free or buy while supporting us. 

Bitcoin relies on a timestamp of successive blocks, containing bitcoin transactions taking place on the network, to ensure that you can not spend the same bitcoins multiple times (double-spending). This set of blocks is what some people have called the "blockchain", or "chain of blocks".

The Bitcoin consensus is based on proof of work, also called Proof of Work in English, and allows transactions to be counted between the different Bitcoin users (with bitcoins), involving two types of actors: on one side the miners, and on the other the knots. The proof of work requires that a complex mathematical problem be solved to validate each block, and include transactions submitted to the network.

Miners are called network participants who equip themselves with dedicated hardware (ASICs) to solve this mathematical problem, and thus verify and include transactions in the different blocks. They are paid for each block by issuing new bitcoins and transaction fees paid by users.

In addition, people who have installed the Bitcoin protocol on their computer (or their computer server) are called "network nodes" in order to check the validity of the information present in each block. This verification is done according to the predefined methods of the consensus mechanism, which are written in the Bitcoin code.
Asymmetric cryptography

The possession of bitcoins is materialized by sets of keys called public and private keys.

Regarding the private key, it is obtained by randomly choosing any number between 1 and 2256. The important thing, in itself, lies definitively in the fact of choosing it really at random, that is, to generate it in such a way that it is not predictable.

The public key is then derived from the private key according to an elliptic curve multiplication (called secp256k1, ECDSA). 

The disadvantages of Bitcoin

However, Bitcoin also has a number of relative disadvantages.

The price of the currency is still very volatile, the fault of a small capitalization. The price of a bitcoin can very well vary up or down very quickly. This is a hindrance to its immediate acceptance as a medium of exchange. Thus, few businesses today accept payments in bitcoins.

The management of private keys is crucial, since they are the ones that give access to funds denominated in bitcoins, even if it concerns crypto-assets as a whole, and not just Bitcoin. If you lose your private keys, you lose the funds attached to it irreversibly.

The fungibility of Bitcoin can also be discussed: In principle, bitcoins are fungible in their network, in the sense that each bitcoin is treated in the same way as all the others on the bitcoin blockchain when it is transmitted to it. network.

However, because bitcoins are fully traceable on their blockchain, a particular bitcoin may have been contaminated if it was used at one time or another during illegal trading, and merchants or crypto-active exchange platforms might decide one day not to accept such bribe bitcoins.

If Bitcoin is actually uncensored at the level of its network, do not fantasize that its use is always without any real consequence: the resistance to censorship has very physical limits, and coercive power might not be able to succeed. to prevent one of its citizens from using bitcoins despite a ban, today it would probably be possible for him to identify this citizen and punish him afterwards.

Finally, the fact that currently a significant number of bitcoin transactions actually take place on exchange platforms induces a reintroduction of a trusted third party in the cryptomonetary universe: if the owner of bitcoins does not have private keys of its bitcoins, it depends on the platform that manages them to recover them. And as long as he has not regained control, it's not really "his" bitcoins anymore.

What is the abbreviation of Bitcoin

The abbreviation of Bitcoin is simply BTC. We can trade Bitcoin against the US Dollar - BTCUSD.

Bitcoin can also be paired with other currencies. In this case, the name of the CFD contract could be, for example, Bitcoin vs. US Dollar CFD, or BTC / USD.
How Bitcoin works

Bitcoin offers the possibility of making payments from one entity to another (in English: peer to peer), in a secure way and at a lower cost, without the need for a bank or a central payment processor.

System transactions take place directly between users' digital wallets and are checked in the blockchain. Transactions are digitally signed with unique private keys, which prove that they come from the owner of the wallet.

Trader Bitcoin

Bitcoin is a volatile asset, with daily price changes of more than 10% fairly common, making investment and Bitcoin trading risky. Of course, there is no high return without high risk and you should not use the money you need to live to trade Bitcoin.

The good news is that Admiral Markets provides an advanced set of contingent orders - Volatility Protection - that have an added utility for highly volatile instruments.

Is Bitcoin a speculative bubble?

The situation surrounding cryptocurrency technologies is very similar to the dotcom bubble of the early 2000s. There are a large number of blockchain projects that announce their ICOs every day. ICO stands for Initial Coin Offering and is a crowdfunding stage of the project. This is a type of IPO, but in the cryptocurrency economy. Projects are funded collectively by the public who buy their "tokens" in exchange for Bitcoin and other major cryptocurrencies. Of course, just like in any other industry, 90% of projects will fail to deliver a functional product and probably there will soon be a number of resounding bankruptcies. At this time, the price of Bitcoin may, to some extent, be overbought because of massive spending by Bitcoin during ICOs.

So, is there a bubble or not? We will only know if the bubble bursts. In the meantime, you can trade the Bitcoin CFD with Admiral Markets and gain leverage of 1: 5 during a 24/7 trading session.

Stay tuned for more interesting comments about Bitcoin and other crypto currencies ... soon!

Remember, it is now possible to trade Bitcoin on a demonstration account of Admiral Markets. Try it today ... it will allow you to test it!

Conclusion

By analogy and to give a more playful definition of Bitcoin, we could consider that Bitcoin is to cryptocurrency what gold was to the monetary system under the Gold Standard.

It is a cryptocurrency queen, serving as a reference for all the following cryptocurrencies positioning themselves as alternatives (altcoins). Within the cryptosphere, Bitcoin remains a systematic benchmark for assessing the potential of new projects.

Starting point for a new Kondratiev cycle (cycles resulting from a major innovation spanning 40 to 60 years), Bitcoin has introduced the possibility of completely rethinking the fundamentals of finance as we know it through the use of cryptocurrencies, but also to question more widely the report of our companies to trusted third parties through the study of new cases of use of blockchain registers.


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