Bitcoin is the most famous cryptocurrency on the market. Designed by the mysterious Satoshi Nakamoto, the digital currency continues to gain in value year after year. Now is the time to learn all about cryptocurrency, from its inception to today.
The term Bitcoin is the assembly of two words of English origin: bit (the unit of binary data) and coin (currency in the language of Shakespeare). Virtual currency was first mentioned in 2008 by an individual (or a group of individuals) who call themselves Satoshi Nakamoto. This is a pseudonym. We do not yet know to whom we really owe the creation of Bitcoin.
Anyway, this mysterious Satoshi Nakamoto stands out today as one of the biggest fortunes in the world. The person, or the collective of people, behind this pseudonym, is one of the 50 richest individuals in the world. It is estimated that Satoshi Nakamoto currently holds, through his own blockchain wallet, 980,000 bitcoins, or more than 58 billion euros.
What is a cryptocurrency?
Bitcoin does not work like Euro, Dollar or Pound Sterling, it is a cryptocurrency. Bitcoin is a digital currency unit that does not depend on any authority or financial institution. No centralized body therefore regulates cryptocurrency. This was, moreover, the avowed objective of Satoshi Nakamoto in le white paper du Bitcoin : escape financial institutions and offer a fully independent currency. In this way, it is impossible to devalue a virtual currency.
If Bitcoin is not regulated by any institution and by any bank, the currency does not escape certain rules. In the absence of authority to regulate Bitcoin, its value is indeed entirely determined by the law of supply and demand. This is why its course is so variable. But this is also why it is possible to make colossal gains in the space of just a few hours. Note that it is also possible to lose money. Ultimately, the value of Bitcoin is based on the trust we place in it.
No offense to detractors of the currency, Bitcoin has established itself as a real currency in recent years. BTC indeed fulfills the three functions of money as defined by Aristotle : medium of exchange, unit of account and store of value.
What is blockchain?
One might think that transactions made with Bitcoin are getting out of hand. This is not the case. In order to guarantee the safety of its users, the creators of Bitcoin invented blockchain technology. The blockchain (or blockchain in French) is at the heart of the very principle of Bitcoin.
Blockchain is the technology that allows information to be stored and transmitted in a completely transparent and 100% secure manner. The blockchain is a huge database made up of all the transactions carried out by its users. When two people exchange Bitcoin through the blockchain, their transaction is encoded on the blockchain network and then locked.
This transaction is called a “block”. The blockchain is made up of all transactions, and therefore all user-designed blocks. Other users do not have access to this block and therefore cannot modify its content. You will understand: no one can take your bitcoins. Contrary to what many internet users think, Bitcoin is not anonymous. The technology is pseudonym. It remains very easy to trace back to an Internet user by finding his wallet on the blockchain.
All active developers of the blockchain network validate and vouch for each exchange. In order for an individual to be able to modify a blockchain, he needs the approval of all the other members of the blockchain. It’s impossible. If the authority is decentralized, it is not necessarily non-existent. Likewise, the Blockchain is not stored on single servers but on all the computers in the network. Each user therefore stores part of the blockchain on their device. Each device in the network is called a “node”.
Like any other computer program, the Bitcoin protocol is regularly updated to improve its efficiency. Recently, the Bitcoin blockchain received the Taproot update. This major upgrade will make single transactions indistinguishable from transactions involving multiple signatures, improving network privacy, and reducing transaction costs.
Bitcoin is not the only cryptocurrency to operate through a blockchain. Most of the 5,023 cryptocurrencies listed by CoinMarketCap work thanks to the blockchain, such as LiteCoin, Ether and its platform Ethereum, or the Dogecoin, Shiba Inu or BNB.
The process of creating Bitcoin is called mining. It is a set of very complex computer calculations that allow each transaction to be quantified. It is thanks to mining that exchanges made in bitcoins are ultra secure. To mine Bitcoin, you will need to arm yourself with powerful computer equipment, an ASIC.
You will have understood it: Bitcoin is only the result of a large-scale computer calculation carried out by hundreds of computers. As with silver and gold, and with all traditional exchange currencies, the amount of Bitcoin that can be mined is limited. Satoshi Nakamoto voluntarily imposed a limit in the Bitcoin code. It is indeed impossible to exceed the 21 million units of Bitcoins : the computer code of the blocks of the blockchain simply does not allow it. It is estimated that the limit will not be reached until 2140. It is this intrinsic scarcity that gives Bitcoin its value.
What is the impact of Bitcoin mining on the environment?
Mining Bitcoin requires you to keep powerful machines running continuously. Not surprisingly, this process consumes a lot of electricity. According to an analysis carried out by the New York Times, it is currently necessary “13 years of domestic electricity”to mine a single BTC. Bitcoin’s power consumption is equivalent to that of a US state like Washington. It even exceeds the energy consumption of Finland, a country of 5.5 million people.
The queen of cryptocurrencies even consumes 7 times more electricity than all of Google’s infrastructure. It is less than the banking sector. Cryptocurrency would consume 113.89 TWh / year, or half as much as the banking sector (238.92 TWh / year) and gold mining (240.61 TWh). However, it should be noted that most Bitcoin mining farms rely on green and renewable energy, like hydroelectric power. In addition, many players in the sector are currently working to reduce the ecological footprint of mining.
To buy a Bitcoin, or a fraction of Bitcoin (satoshis or sats), it’s quite simple. You just need to go to an online exchange platform. Most of these platforms are accessible via an application available on the Google Play Store or on theApp Store. Among the best known are Coinbase, Crypto.com or even the essential Binance. On these platforms, you can exchange your Bitcoins, convert them into euros, Ether, USDT (a cryptocurrency whose price is stable) or BNB. Most exchanges offer to deposit money with a credit card or via wire transfer.
There are several ways to grow the Bitcoins you have purchased. Experts have defined several ways to invest in cryptocurrency. Depending on your goals, your starting bet and your greed, you will have to define your investment tactics. Likewise, you can decide to bet on the short term or the long term. Before continuing, we remind you that every investment carries a risk.
If you want to invest in the long term, we will advise you the “Hold” method. Deposit a small amount in Bitcoin, forget about it for a few years and then come back to see if your initial bet was small. Nothing prevents you from taking a look at the price and the trends from time to time but in any case, you will not be reselling your Bitcoins. In this tactic, you first set an amount from which you will consider selling.
Another popular investment method is le DCA (Dollar Cost Average). This practice consists of regularly depositing a defined sum on a wallet. For example, you can invest 15 or 50 euros every month. This tactic makes it possible to smooth the entry price of investors and not to take out a large sum at once. Many platforms make it possible to invest in DCA, including the French firm StackinSat.
More risky but sometimes more fruitful, the trader’s method consists of buying and selling in a short period of time. You buy a fraction of bitcoins when the price is at its lowest, and you sell when the price is at its highest. To achieve your ends, you will have to try to predict the market price. If you’re on a roll, you can give it a go. Warning: this is by far the riskiest method!
What can I buy with Bitcoin?
Don’t think that Bitcoin is just for speculation. Cryptocurrency can also make it possible to to shop online. Currently, more than 100,000 websites around the world allow their customers to pay with bitcoins. Retailers that accept Bitcoin as payment display a warning ” We accept bitcoins » Where ” Bitcoin accepted here ».
In which countries is Bitcoin prohibited?
Fearing that cryptocurrencies could facilitate money laundering and participate in the financing of terrorist groups, some countries have legislated against Bitcoin. This is especially the case with China. The Chinese government has banned cryptocurrency payments. China prohibits any foreign platform from providing services to investors resident in China. Exchange platforms like Coinbase, Binance, Kraken or even Bitfinex are not authorized to provide services to Chinese nationals. Other nations of the world, such as India or Nigeria, have openly declared themselves hostile to cryptocurrencies. The specter of a ban looms over many territories.
On the other hand, other countries have instead decided to adopt cryptocurrency. This is the case of Salvador. In this South American country, Bitcoin is recognized as a means of payment. It is possible to buy a coffee or a McDonald’s with Bitcoin. All traders in the country must allow residents to pay for their purchases with cryptocurrency. The Salvadoran government has even launched its own app to easily pay with BTC, the Chivo Wallet. Note that many countries around the world, (South America and Africa), are planning to follow suit with El Salvador.
The price of Bitcoin
Since its inception, the price of Bitcoin has continued to rise, causing an explosion in the valuation of the cryptocurrency market. In November 2021, the price of the digital currency finally settled atu above $ 60,000. Bitcoin’s price peaked to $ 69,000 before losing several thousand dollars in value.
Many observers believe that Bitcoin should continue to rise in value. Experts believe that the digital currency could reach 100,000 dollars In the coming months. Tom Lee, co-founder of Fundstrat and Wall Street analyst, even expects a price to reach $ 168,000 by early 2022.