Bitcoin - a first crypto currency, which appeared in the world relatively recently - in the 2008 year. A certain Satoshi Nakamoto was named the creator of bitcoin. But it is still unknown who is hidden under this pseudonym. This may be a loner who is a genius in programming or a group of such people. One thing is exact the creators managed to ensure that Bitcoin became an objective reality. It is simply impossible to ignore this currency today. Everyone has to reckon with it, from individuals to world states. So, let's take a closer look at what bitcoins are and why they are needed.
Bitcoin (from the English Bitcoin) is a digital currency that is protected by cryptographic encryption. There is no physical expression for this currency. It is only a registry stored on a computer network. These registers contain information about all operations with bitcoins (date and time of the transaction, monetary units, and counter parties). The information ledger that contains the records of transactions is called a block chain. It is he who acts as the guarantor of the complexity of the crypto currency network and helps protect the currency from counterfeiting. Also, the block chain does not allow outsiders to interfere with crypto currency transactions.
The purpose of cryptographic encryption is to ensure the maximum degree of network security. Simultaneously, the basic principle of the system is that the registry is updated simultaneously on all computers that participate in the block chain. Naturally, changing chain links on all devices at once is almost impossible. As a result, it is virtually impossible to hack or gain unauthorized access to the chain's information.
It is essential to understand that the only security for Bitcoin is the demand for block chain users. The popularity of this crypto currency is primarily provoked by the media and the desire of people to free themselves from centralized financial systems. It is the lack of security that makes people with a critical mindset doubt bitcoin. They reason like this: if a crypto currency is not backed by anything other than a ledger, isn't it just a bubble?
Such reasoning is quite logical. Today, the value of bitcoin is continually growing ↑ and has already reached an incredible size. At the same time, the guarantee that this trend will continue, no. If large capital owners decide that investing in bitcoin is no longer profitable, the demand for this monetary unit will sharply decrease or even disappear altogether. This will inevitably lead to a fall ↓ in the bitcoin rate.
People Who Sell Their Goods for Bitcoins to Make Huge Profits
This development of events is quite likely. But even despite this, traders, miners, and business people who sell their goods for bitcoins continue to make huge profits on this currency. Some financiers believe that the real value of bitcoin is zero. However, today, many organizations, both operating on the Internet and conducting physical activities in reality, accept Bitcoin as payment for their goods and services without any problems. In the modern world, crypto currency can not only book a hotel room but also buy a car and even a house.
On the day of this writing, the cost of 1 Bitcoin exceeds 10,000 dollars. Less than half a year ago, the rate was almost three times lower. The crypto currency continues to grow ↑ in price, and while there are no downward trends. Another advantage of bitcoins is the limited supply of 21 million coins. This makes the crypto currency similar to precious metals. Their number is continuously decreasing, so the extraction is becoming more and more difficult. The cryptographic algorithm is characterized by the following feature: the number of bitcoins mined is known in advance.
By the way, today, there is a fractional part of bitcoin in circulation. It is called satoshi and is the one-hundred- millionth part of bitcoin (0.00000001 BTC). Its owners can access the crypto currency around the clock anywhere in the world where there is Internet access. To purchase or pay bitcoins, it is enough to register a wallet of this crypto currency. An article on our website explains in detail how to create a bitcoin wallet and replenish it.
📢 However, remember that if you lose the key generated during the registration process, it will be impossible to restore it. As a result, access to funds will be lost entirely.
How Concept Of Bitcoins Appears?
The idea of creating the prototype of an electronic currency appeared in 1983. This thought came from D. Chaum and S. Brands. As a result, in the 1997 year, A. Beck developed a system Hash Cash. The main principle of its operation was proof of the process being carried out. It was this system that became the foundation for the development of parts of the future block chain. In 1998, N. Szabo and V. Day voiced their ideas for creating a crypto currency. The first presented the algorithm of the future market for a bit-gold. The second is the rationale for the concept of virtual currency "b-money."
Further, H. Finney linked the block links that were used in Hash Cash. For this purpose, an IBM encryption chip was used. As a result, this person became one of the prominent participants in the creation of bitcoin. In 2007, Satoshi Nakamoto began work on creating a peer-to-peer network, a payment system. As a result, the following year, the operation principles were posted and the protocol of such a structure. After two years, work was completed on writing the protocol and publishing the client code. At the beginning of 2009, a starting block was generated, and the first 50 bitcoins were mined. The crypto currency name comes from two words: bit (translated as bit) and coin (translated as a coin). Often, by analogy with the code used for various currencies, Bitcoin is abbreviated as BTC.
But it should be understood: the official ICO 4217 standard does not assign codes to digital currencies. As before, and now, bitcoins exist only in the form of records in the block chain. It is here that all operations are stored and carried out in the public domain. After nine days after the first Bitcoins generation operation was carried out with them. It was a ten currency unit transfer that Nakamoto made in favor of Finney. Already in September 2009, bitcoins were exchanged for fiat money. Malmi transferred 5,000 bitcoins to the user of New Liberty Standard. In return, he received $ 5.02 for his PayPal wallet. The purchase with bitcoins was first made in 2010. The American Honich bought two ordinary pizzas for 10,000 BTC. In mid- 2017, the developers launched a new kind of bitcoin - Bitcoin Cash. The history of the first crypto currency rate is more clearly presented in the table below. Table: "Change in bitcoin's value from the moment of its creation to the present."
Date Bitcoin cost
The 2010 year during the year, bitcoin increased significantly in the price: at the beginning of the year, one bitcoin cost about $ 0.008; in the middle - $ 0.08; at the end - $ 0.05, The 2011 year at the beginning of the year, one bitcoin was worth about $ 1. Already in March, $ 31.91 was given for one bitcoin. But by the beginning of June, the rate dropped by about three times to $ 10.
· In 2011, a considerable number of Bitcoin wallets were hacked and, accordingly, stolen from them
· The 2012 year the cost of bitcoin ranged from $ 8 to $ 14 per unit. At this time, the Bitcoin Central banking organization was opened
· The 2013 year, the bitcoin rate rose sharply and fell sharply: in March, $ 74.94 was given for 1 BTC; in November - $ 1,242, $ 600.
· The 2014 year Bitcoin price stabilizes and is set at $ 310 per unit.
· The 2015 year during the year, the rate fluctuated around $ 300.
· The 2016 year another jump in the rate: at the beginning of the year, it was about $ 400; in the middle - about $ 722; at the end of the year, the value of bitcoin reached $ 1,000 per unit.
· The 2017 year The BTC rate broke all records: in August, it fluctuated in the range of $ 2,707 - $ 4,585; in December - from $ 10,000 to $ 19,100.
· The 2018 year Earlier this year, the course is 15 878 $
· August 2019 the year About $ 11,500
Who Created Bitcoin and What Is Known About the Creator of Bitcoin - TOP-6 Popular Versions 📌
Until now, no one knows who is hiding under the pseudonym, Satoshi Nakamoto. This gives rise to the emergence of a considerable number of versions as to who is the creator of the first crypto currency. Today, many people want to appropriate authorship. Below are the most popular versions of who is the creator of bitcoin.
Many people believe that it was Nick Szabo who invented bitcoin. The reason for the popularity of this opinion is that it was he who, ten years before the creation of the first crypto currency, worked on a project called Bit Gold. However, it was not implemented. Already in 2008, Szabo again announced his intention to implement his project finally. Information about bitcoins soon appeared. Some experts are sure that this is a coincidence. But others think that Sabo and Satoshi are the same people.
Naturally, there is no evidence that it was this person who created Bitcoin. Moreover, Nick Szabo denies that the first crypto currency is his brainchild. The history of the named exchange knew both ups and downs. Despite this, trust in the crypto currency has not been lost. Thus, there are many versions of who created bitcoin. However, it is impossible to be 100% sure which of them is related to reality and which is not.
What bitcoin looks like: digital and physical 📑
Each participant in the bitcoin payment system has its cryptographic account, as well as a secret password. With the help of them, the user can make transfers from his account to other stores. However, not everyone understands what bitcoin is. The following describes how it looks in virtual and physical form.
Bitcoins are virtual digital money. Therefore, they look like an electronic file. All electronic currencies are a particular numeric function that satisfies the conditions specified in the original system code. To fully understand the principles of working with bitcoins, you need to understand hashing and cryptography. However, for novice users, knowledge of all these processes is not required. The fact is that they are all performed by special programs. Therefore, in-depth programming knowledge is not required.
The network participants have enough knowledge that Bitcoin is the sum of a hash function. The latter is the source code or bitcoin address. The name public key is also used. The hash amount is calculated automatically from the original crypto currency key. The reverse process does not work. Therefore, any network participant can post information about their public keys.
It is crucial to understand! Until the user himself provides the source code, no one can calculate it. Therefore, network participants will not be able to gain access to monetary units. To make it easier to carry out operations to transfer bitcoins and pay for services due to them, a unique wallet is used. It stores a digital key that is required for transactions.
2) In Physical Form
On the one hand, Bitcoin is a crypto currency. But on the other hand, to declare that this is only a virtual currency is a mistake today. The fact is that tangible Bitcoin coins are already circulating on the market, made of metal. Their cost ranges from several tens to tens of thousands of dollars.
The Algorithm For Making Bitcoin Coins Is As Follows:
1. The creator of the crypto coin or its customer chooses the metal for production;
2. The coin is cast in the original design, and on one of the sides, the denomination is indicated, for example, 0.1 BTC, 1 BTC, 10 BTC;
3. A unique Bitcoin address is generated;
4. An amount of bitcoins equal to the face value of the coin is transferred to the generated account;
5. The generated address is applied to the cash and covered with a hologram.
6. Today these coins are mostly souvenirs. However, they have a value indicated on them.
How Bitcoin Works
To understand how bitcoin works, the concept of a hash function is essential. According to a specific algorithm, it is a mathematical transformation that transforms information into a unique combination of numbers and letters of a fixed length. This combination is called a hash or cipher. Changing even one character in the hash entails a radical change in the cipher. It will no longer be possible to restore the original value. Therefore, the code generation process is irreversible.
Transferring bitcoins between wallets is called a transaction. The signing of such transactions is carried out using the secret key contained in the wallet. With this signature, the transaction is protected from changes after the transfer to the network is complete. All conducted and confirmed transactions are included in a ledger called a block chain. It is he who contains the entire history of operations with bitcoins. Based on the block chain, wallet balances are checked, as well as the expenses of their owners. Cryptography is responsible for maintaining the integrity and history of transactions.
Transmission of transactions between network participants and their confirmation is carried out through a process called mining. It is the processing of information in a distributed system used for chronological confirmation of operations before they are included in the block chain. A block is preliminary formed from transactions that meet the requirements of cryptography. The network then verifies the operations. Each block also contains information about past operations, the hash of the previous link (added to maintain the integrity of the chain), the fact that new units of bitcoin were issued, and the solution to the problem. The main essence of mining lies precisely in solving problems.
No one monitors mining. Despite this, it is impossible to replace part of the block chain. Mining is an integral part of the transaction security scheme. Its primary purpose is to verify transactions on the network, as well as to prevent duplicate payments.
What Is the Difference between Bitcoin and Paper and Electronic Money - 5 Main Differences 📋
Non-cash transactions with bitcoins are similar to traditional bank card payments and transactions carried out over the Internet. When carrying out operations with crypto currency, physical funds are not transferred to anyone. Only the change of the account state record in the network is carried out.
Also, unlike the financial operations, crypto currency registers are stored not on a single server, but all computers participating in the network at once. There are other fundamental differences between bitcoin and electronic and paper money. The main ones are presented below.
[1] No inflation
The growth in the number of bitcoins and their depreciation is impossible for technical reasons. The program code determines the number of bitcoins. It is impossible to release an additional mass of crypto currency into circulation.
However, the more ↑ bitcoins are mined, the more difficult it becomes to mine. Previously, for this process, it was enough to have an ordinary home computer. Today mining requires special equipment. An industrial farm consists of several hundred networked processors. Such a farm consumes a considerable amount of electricity.
The mining algorithm implies a periodic reduction in the reward for calculating a block. Its size decreases ↓ by two times every four years.
[2] Decentralization
All transactions made with bitcoins are reflected in the broad information base. Each member of the network has the right to track transactions. All blocks are interconnected in a block chain, which is a continuous chain. But it is essential to understand that transparency of transactions does not mean that it will be easier to commit fraudulent activities. Banking organizations store all information on unified information servers. Accordingly, hackers have a chance to gain access to information.
In contrast, all information about bitcoin transactions is stored simultaneously on all network participants' computers and is regularly updated. Even the most ingenious hackers are unlikely to gain access to half of the devices on which the block chain is stored. Only data changes simultaneously on 51 % of computers will provide the ability to control the block chain. Moreover, the account where the bitcoins are stored cannot be frozen. In contrast, real money bank accounts can be easily blocked. The circulation of virtual money is not subject to regulation by the government of any state or any financial institution. Therefore, Bitcoin is not affected by economic crises and revolutions. This crypto currency is the most democratic currency in the world.
[3] Placing in the public domain all information about transactions with bitcoins
All records of transactions with bitcoins are kept in the public domain on the block chain Internet resource. Any user can easily trace the source of the origin of funds and their path after payment. However, the transparency of transactions does not mean that everyone can see the balances in a particular bitcoin wallet. The fact is that, unlike transactions, each account remains anonymous.
[4] Lack of intermediaries in the implementation of transactions
Transactions with bitcoins are carried out on P2P interaction; there is no need to involve third parties. Therefore, no third party can stop the operation or system action. Ultimately, this leads to the fact that there is no need to transfer the commission to the intermediary.
[5] High speed of operations
In theory, Bitcoin transactions are carried out almost instantly. Even for making transfers between accounts opened in different countries, it takes a few minutes. However, in practice, the level of development of modern technology at the moment lags significantly behind the block chain.
Therefore, today network users have to wait for transactions. Sometimes the confirmation process takes several hours. Thus, bitcoins have several fundamental differences from traditional real money. This is the money of the new generation, which is the most democratic today.
How Much Was Bitcoin When It Appeared 📈
Today the cost of bitcoin is at a reasonably high level. However, this was not always the case. At the initial stage, few wanted to give even a few cents per unit of crypto currency. But it is worth considering the process of establishing the course from the initial step. Information about the creation of the first crypto currency appeared in 2008. Already in January 2009, the bitcoin network began to operate. At this time, the first block of the crypto currency was generated, and the first bitcoin client was released, for these actions were paid in the amount of 50 dollars.
At first, the demand for crypto currency was almost zero. At the end of 2009, an average of 700 to 1,600 bitcoins could be purchased for 1 US dollar. Already in 2010, the first exchanger began operating, which allowed exchanging crypto currencies for dollars. The first purchase was made in the same year, paid for with bitcoins: 2 pizzas were purchased for 10,000 units of crypto currency ($ 25). If you recalculate its cost at the current rate, you get a prominent figure.
How many bitcoins are there in the world 💰
Users should remember that the block chain is limited by software code. Therefore, the total number of bitcoins in the world is known in advance. It is set at 21 million units of crypto currency. At the same time, 1 BTC is equal to 100,000,000 Satoshi.
Moreover, every year the mining of new bitcoins becomes much more complicated—accordingly, their release rate into circulation decreases↓. To date, about 16 million bitcoins have been calculated. At the same time, part of the crypto currency is blocked forever. This is because its owners have lost access to their wallets.
FAQ - answers to frequently asked questions 💬
Bitcoin is a relatively recent virtual currency. Therefore, in the process of learning this concept, beginners have a vast number of items. To save you time, we answer the most popular ones.
Question 1. How to earn bitcoins for a "dummy"?
Above, we tried to explain what bitcoin is in simple words. Now let's tell you how to earn it.
Many, having learned about mining and its opportunities, decide to purchase the equipment necessary for this process. However, today financial experts warn against severe investments in this area. Moreover, they recommend treating investing in bitcoins solely as an additional way to generate income.
Mining equipment becomes obsolete very quickly, literally in a few months. At the same time, the bitcoin rate is not reliable. A vast number of speculative factors influence the value of a crypto currency. Therefore, today's high quality of bitcoin is not a guarantee that the owners of a large amount of this currency can count on a secure future. Most sources claim that the growth of the bitcoin rate will continue in the future. As a result, many newbies start to think that everyone is making money on bitcoins and missing out on profits. Professionals do not get tired of repeating: crypto currency is a high-risk ↑ investment tool. They do not advise putting all your savings into it.
It is crucial to understand! Bitcoin is still an experimental project. It is almost impossible to predict what the crypto currency rate will be even shorter. Therefore, only free money is worth investing in bitcoins. By the way, some experts argue: if you want to earn a lot on crypto currency, it makes sense to produce mining equipment. This will help you get a considerable income. There are several ways to earn bitcoins in the world; below are the most popular ones.
Method 1. Mining
Mining is a kind of basis for the existence of bitcoin. Miners carry out the most critical processes for crypto currency. It is they who ensure the life of bitcoin, as well as the reproduction of new coins. At the same time, mining equipment requires serious financial investments. To start mining bitcoins, you will have to purchase:
· High-power power supplies;
· Modern, powerful specialized video cards;
· Elements of equipment for ventilation and cooling;
· The most modern processors.
Today, mining on one computer has become unprofitable. Therefore, modern miners create unique farms, which are several incredibly powerful computers of the latest generation, connected to a network. Such equipment allows you to mine bitcoins around the clock.
In Addition To Purchasing Equipment, Miners Must Take Into Account The Presence Of Other Costs Necessary For The Farm's Functioning:
· Payment for electricity, which is consumed in huge quantities;
· Purchase of specialized programs for mining.
But you can use another less expensive way to mine bitcoins. This option is called cloud mining. At its core, it is a lease of a share in equipment, which may be physically located quite far from the investor. You will have to pay a fee for using hardware and software. It is worth considering! In cloud mining, mining is carried out not by an individual but by a group of people. The miner uses the services of the farm. The bitcoins obtained from pooled mining are distributed among the participants in the process in proportion to their contribution.
The Cloud Mining Algorithm Is Quite Simple:
· choosing a site offering services of this method of mining bitcoins;
· check-in;
· replenishment of the account for a certain amount;
· Acquisition of capacities for the invested funds.
When the previous steps have been completed, you can start mining crypto currency. It can be carried out in automatic or semi-automatic mode. The most crucial step towards cloud mining is choosing a site. As in all financial areas, you can run into scammers here. Some simply misappropriate money from naive investors, while other cloud mining services are so-called HYIPs. They are financial pyramids that can collapse at any moment.
Method 2. Trading
Bitcoin is actively traded on the exchange like the dollar, euro, and other fiat currencies. Those who bought even a small amount of this crypto currency about eight years ago have amassed a fortune today. There are many examples in history when people managed to get rich on bitcoins.
For example, one student from Finland bought bitcoins in 2009 for $ 27. After that, he forgot about his purchase. When he remembered them a few years later, his capital was almost 900 thousand dollars. But do not think that the situation will remain the same in the future. Making money on the change in the value of bitcoin is a reasonably practical process. However, doing it without the appropriate knowledge is quite risky.
Method 3. Performing Simple Tasks on the Crane X
Bitcoin faucets are Internet resources that allow you to receive satoshi for completing elementary tasks:
· clicks on banners;
· introduction of captcha;
· watching videos;
· Being on specific sites for a fixed period.
Satoshi earned in this way is credited to the bitcoin wallet. Please note: faucets pay a small reward for completing tasks. On average, it ranges from 100 to 300 satoshi.
Also, some faucets periodically hold for more severe amounts. However, it will be possible to withdraw funds to the wallet only after accumulating a predetermined amount of bitcoins. The main advantage of generating income from cranes is that they do not require any investment. Also, most of the sites offer to earn extra money by creating a referral network. At the initial stage, faucets were created to increase the popularity of bitcoins ↑. Gradually, however, this option has become a full-fledged way to generate income.
Method 4. Affiliates
Affiliate programs are a reasonably promising way to generate income in bitcoins. Its essence lies in placing a particular link on its sites, blogs, and social network pages. In this case, a reward is paid every time any users click on it. You can get an affiliate link on the faucets and the resources of the game for bitcoins. To get the maximum income in this way, you should post the link on as many sites as possible, where such actions are not prohibited.
Method 5. Gambling
Gambling, at its core, is an ordinary online game that allows you to make real money. But unlike traditional options, payments are made here not in rubles or dollars, buy bitcoins. There are two ways to generate income from these games:
· play independently, which is associated with a particular risk, since in any game, not only winnings but also losses are possible;
· Start developing a referral network. This method is more reliable, but income, in this case, is determined by the ability to attract users to the system.
Question 2. How are bitcoins secured?
Direct software Bitcoin is missing. Therefore, users may think that this crypto currency has no value. However, this assumption is wrong. Precious metals also lack value reinforcement. The value of all of them is formed by society, which relies on several factors:
· Stock size;
· the amount of supply and demand;
· Characteristics of precious metals.
Important! The value of bitcoin lies in the fact that it can be used as a means of payment for payments for goods and services. The security of a crypto currency is the value consumers are willing to give for an asset in a certain period. Another common mistake when calculating bitcoin's real value is to tie it to the cost of electricity consumed during mining.
Question 3. Where do bitcoins come from?
The government issues fiat money. Indirectly, the value of the issue is related to the size of gold and foreign exchange reserves. However, the actual emission volume may not be limited: the state prints as much money as it needs. Unlike fiat money, bitcoins are not associated with any country in the world. New crypto currency coins are formed as a result of servicing the payment network by computers. Any transaction must be added to all computers that are connected to the Bitcoin crypto currency network. However, before the information is added to the registry, it must be verified and signed. To this end, miners must calculate a signature, which is a very complicated computer task. For carrying out such calculations, the miner receives a reward in the form of a share of bitcoin.
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Daud Edwin
Pakistan
nice explanation