The digital currency that more theories has generated since its appearance and its rapid expansion has caused such a stir that finding specific information about bitcoins is often a mission impossible. In this article we explain in a simple and understandable way how this currency that is revolutionizing Internet payments works.
What is bitcoin and what is it used for
In order to sort out all the ideas, let’s go step by step. First, what is a bitcoin exactly? It’s an electronic currency that doesn’t belong to any specific country. This means that it’s not controlled by anyone. “Traditional” currencies are issued by bodies such as central banks or governments that can exercise some kind of control over them, but this is not the case with bitcoins. It is a cryptocurrency, i.e. an encrypted system that makes it unintelligible for unauthorized recipients.
A bitcoin is basically a string of encrypted numbers. These numbers are based on an algorithm that determines which of these numbers correspond to valid currencies. These codes are associated with an address that indicates who the bitcoins belong to, but anonymously, since the owner is the only person who knows that address. With bitcoins, sending money over the Internet is as easy as sending an email.
But who creates them? Bitcoins are generated on the Internet by users who download a program for this purpose and are known as “miners”. They install a specific program on their computer to verify bitcoin transactions. In exchange, the miner is rewarded with this currency. As the miners work, new bitcoins are created and enter the market, but always at a fixed pace. Since it is a network made up of computers around the world, it’s a decentralized system that no one can control and, therefore, it’s very secure.
How much is one bitcoin worth?
The price of a bitcoin varies depending on demand. When it increases, the price goes up, and vice versa. To check the current price of a bitcoin, there are many calculators on the network that report this data in real time. Bitcoins are created at a steady pace until 21 million are reached, a figure that is estimated to be reached in 2041. Today there are more than 11 million in circulation. Since its creation (in 2009), the bitcoin’s value has increased nearly 50 times. On January 28, 2016, when this article was written, one bitcoin was worth €351.81. One should bear in mind that being a digital currency, it is entirely divisible, so we often hear about BTMs or mBTC (equivalent to 0.001 BTC).
So now you know what it is, where it comes from and how much a bitcoin is worth. If you also want to find out how to use them, keep reading.
To start using it, you have to use a program (online or from the computer itself) known as “digital wallet”, to associate it with the bitcoins you own. The function of these wallets is to certify the validity of this currency. As we mentioned, a bitcoin has a public and a private key. Any transaction is based on the exchange of public addresses that are instant and can be monitored in real time without the need for intermediaries.