The crypto-currency Bitcoin: currency of the future or scam of the century? Discover everything you need to know about the most famous crypto-currency: history, operation, dangers, advantages, and above all how to invest in BTC and eventually become rich (we wish you)…
Definition and history of crypto-currency Bitcoin
Bitcoin is a digital currency created in January 2009. It is a cryptocurrency, also called virtual currency. It is a totally virtual currency.
It could be defined as an “online” version of money. It is possible to use it to buy products and services, and more and more companies accept it.
This virtual currency was born following the real estate crisis of 2008, in a context of uncertainty and mistrust vis-à-vis traditional monetary systems.
The concept and operation of Bitcoin are presented in a white paper written by the mysterious “Satoshi Nakamoto”, considered the creator of this technology and whose true identity is unknown.
This cryptocurrency offers the promise of lower transaction fees than other traditional online payment mechanisms. Its real advantage, however, is its decentralization, unlike currencies created by governments.
There is no physical bitcoin. This currency is entirely virtual and is based on balances kept up to date on a public register accessible to all. Crypto-currency Bitcoin is created, distributed, exchanged, and stored through this decentralized ledger called Blockchain.
Likewise, all bitcoin transactions can be viewed seamlessly. These transactions are verified by a system that requires immense computing power.
With its meteoric popularity, Bitcoin has launched a real trend. Many other cryptocurrencies have since emerged. They are called “altcoins”. However, “BTC” remains the most important cryptocurrency in terms of market capitalization.
How does crypto-currency Bitcoin work?
To understand how Bitcoin works, it is necessary to understand the different elements on which its operation is based. Here are the key things to remember.
What is Blockchain?
Bitcoin is one of the first digital currencies to rely on peer-to-peer technology to facilitate instant payments. This currency is based on a set of computers considered “nodes”.
These computers run Bitcoin’s code and store its blockchain. A blockchain can be defined as a collection of blocks. Each block represents a collection of transactions.
All computers running this blockchain have the same list of blocks and transactions and can see new bitcoin transactions populate new blocks. It is therefore impossible to deceive this system.
Transactions can be tracked in real-time by anyone, without even having to own a “node”. Transaction history can be tracked, so no one can spend bitcoins they don’t have, make copies or reverse transactions.
What is crypto-currency Bitcoin mining?
Individuals and companies owning some of the computing power that Bitcoin relies on and participating in this network of nodes are referred to as “miners”. They provide the power to process transactions on the blockchain and are rewarded with new bitcoins and a percentage of bitcoin transaction fees.
Together, the miners form a decentralized authority overseeing the security and legitimacy of the Bitcoin network. New bitcoins are created and made available to miners over time so that the total bitcoins reach 21 million. At the end of 2020, there are approximately 3 million bitcoins left to be mined.
Basically, bitcoin “mining” involves harnessing computing power to discover new blocks that can then be added to the blockchain. This is how new bitcoins are created.
In 2009, the discovery of a new block was rewarded with 50 new bitcoins. However, every 210,000 blocks, this reward is halved. In 2020, it stands at 6.25 bitcoins.
Different types of hardware can be used to mine Bitcoin. Some, however, allow you to get bigger rewards. This is the case of chips of the ASIC (Application-Specific Integrated Circuits) or GPU (Graphic Processing Units) type.
A bitcoin can be divided up to eight decimal places, or 100 millionths of a bitcoin. The smallest unit is called Satoshi. In the future, if necessary, it might be possible to split bitcoins even further.
What is a bitcoin wallet?
Bitcoin “token” balances are maintained using public and private keys. These keys look like long strings of numbers and letters linked by encryption algorithms used to create them.
A public key is similar to a bank account number and serves as an address to which bitcoins can be sent. The private key is similar to a credit card code and is used to authorize bitcoin transfers.
Bitcoin owners can store this cryptocurrency on virtual wallets. These devices facilitate trading and allow users to track their assets.
It is very easy to send bitcoins to a wallet. Simply choose the amount and enter the address of the wallet in question. Similarly, you can provide your wallet address to someone to send you bitcoins.
What are the advantages of Bitcoin?
Bitcoin has several advantages. First, it allows confidential and secure transactions, with relatively low fees. Transactions contain no personal information, eliminating the risk of data leakage or identity theft.
The other strong point of Bitcoin is its immense growth potential. Many investors hold on to their bitcoins betting that their value will skyrocket when the cryptocurrency is truly democratized.
This virtual and decentralized currency also makes it possible to avoid traditional intermediaries such as banks and governments. A significant advantage, in the context of economic crisis and recession…
The history of bitcoin
Bitcoin’s history begins on August 18, 2008, when the domain name bitcoin.org was registered. Today, this domain is “WhoisGuard Protected”. This means that the identity of the person who registered this domain name is not made public.
A few months later, on October 31, 2008, a man named Satoshi Nakamoto made an announcement on the Cryptography mailing list of the metzdowd.com website. It announces that it has developed “an entirely peer-to-peer payment system, without third parties”. This white paper lays the foundations of Bitcoin and cryptocurrency.
On January 3, 2009, the first block of Bitcoin was mined. This is block 0, also known as the “genesis block”. This block contains the enigmatic text “The Times 03/Jan/2009 Chancellor on the brink of a second bailout for the banks”. This can be interpreted as political commentary…
Subsequently, on January 8, 2009, the first version of the Bitcoin software was announced on the Cryptography mailing list. Block 1 will be mined on January 9, 2009, and the gold rush begins all over the world. The first transaction takes place on January 12, 2009.
In December 2009, version 0.2 of the software was released. On November 6, 2010, the symbolic threshold of one million dollars in capitalization was crossed.
In October 2011, the first “fork” of Bitcoin gave birth to Litecoin. Another key date: June 3, 2012, block 181919 was created with 1322 transactions and remains the largest block to date.
On September 27, 2012, the Bitcoin Foundation was established. A second fork takes place on August 1, 2017, to form Bitcoin Cash. In September 2017, China banned BTC exchanges and sowed doubt.
Despite this, in December 2017, the Bitcoin phenomenon took the world by storm and this cryptocurrency reached an all-time high… before the value of cryptocurrencies collapsed by 80% in September 2018.
At the end of 2020, however, Bitcoin again broke its value record and crossed the symbolic threshold of $20,000. Everything suggests that the story has only just begun…
Who invented bitcoin? Who is Satoshi Nakamoto really?
No one really knows who invented Bitcoin. The name of Satoshi Nakamoto is only a pseudonym, and could just as easily designate an individual as a large group at the origin of this crypto-currency…
Many people have claimed to be the creators of Bitcoin and claimed to be the real Satoshi Nakamoto. However, there is currently no concrete evidence…
Several reasons may explain Satoshi Nakamoto’s desire to preserve his anonymity. The most obvious seems to be to protect your privacy. Bitcoin has become a truly global phenomenon, and its inventor would no doubt be harassed by the media and the public if he exposed himself in broad daylight.
Additionally, Bitcoin poses a threat to current banking and monetary systems. If this cryptocurrency manages to outperform national currencies, governments would risk taking legal action against its creator.
Also, by now, that person has likely become extremely wealthy using Bitcoin. In 2009, 32,489 blocks were mined with a reward rate of 50 BTC per block for a total of 1,624,500 BTC. At the end of 2020, this sum is equivalent to more than 30 billion dollars.
Logically, Satoshi was one of the first to mine Bitcoin and probably owns most of the Bitcoin in circulation. By revealing his identity, he would therefore risk being the target of criminals from all over the world.
Before Nakamoto, Hashcash was invented in 1997 by Adam Back. Other BTC precursors include Wei Dai’s b-money, Nick Szabo’s bit-gold, and Hal Finney’s Reusable Proof of Work. The original Bitcoin whitepaper also cites Hashcash and b-money among other researchers from various disciplines…
How to earn bitcoins?
Let’s get to the heart of the matter, and what is perhaps the main reason for your presence on this page: how to earn bitcoins. There are several methods.
Become a bitcoin miner
As mentioned earlier, the main technique for earning bitcoins is mining. To become a miner, you must invest in powerful computers to create a “rig”.
By using the power of these machines to discover and add new blocks to the Bitcoin blockchain, you will receive a percentage of the new bitcoins generated over time. However, it is increasingly difficult to get rich from bitcoin mining.
It takes several years today to hope to earn a bitcoin through mining. In addition, this operation could cost you more electricity than what it would bring you…
Receive bitcoins as payment
Bitcoins can now be accepted as payment for many products and services. If you manage a shop or a store, you can offer your customers to pay in bitcoins.
All you have to do is invest in a terminal, or simply display a QR code linked to your wallet address. Likewise, online businesses can add this option in addition to traditional payment methods such as credit cards or PayPal.
Receive your salary in bitcoins
If you are self-employed or self-employed, you can get paid in bitcoins for your work. If you offer an online service, for example, all you have to do is add the address of your bitcoin wallet as a means of payment on your website.
Additionally, several platforms specialize in bitcoin-paid jobs. We can mention Cryptogrind, Coinality, Jobs4Bitcoins, and BitGigs. Similarly, Bitwage offers you to convert a percentage of your salary into bitcoin.
Buy crypto-currency Bitcoin with real money
It is now very easy to buy bitcoins with real money. All you have to do is create an account on an exchange like Coinbase, and deposit some Euros or any other currency into your wallet.
You can then exchange this money for crypto-currency Bitcoin or another cryptocurrency offered on the platform. It is then possible to send these bitcoins to the recipient of your choice or to resell them for real money. In some countries, there are also Bitcoin “dispensers”, compatible with bank cards.
Invest in bitcoins
crypto-currency Bitcoin can be used as a means of payment for many products and services. However, to get rich, it is also possible to invest in this cryptocurrency, the value of which changes over time.
Many people are convinced that this digital currency represents the future of the financial system. It makes payment easier, faster and cheaper and therefore has many advantages over traditional currencies.
Exchange rates are also often attractive. Many choose to trade their savings in euros or dollars, or even commodities like gold, for bitcoins.
Unfortunately, capital gains made from Bitcoin are now taxed by the tax authorities, as in many countries. Despite this, investing in BTC can still bring in a lot of money.
As with any asset, the principle of investing is to buy bitcoins when the price is low to sell them when the price is high. The most common way to buy crypto-currency Bitcoin is through an “exchange” type platform. Coinbase, Kraken, eToro are some examples of popular exchanges.
However, keep in mind that Bitcoin is a high-risk investment. Many people have gone bankrupt thinking of making a fortune, as the price of BTC can rise dramatically and crash overnight…
There is also a risk that governments will seek to regulate or even ban the use and purchase of bitcoins. This is already the case in some countries. For good reason, this cryptocurrency is commonly used for money laundering, tax evasion, or illegal transactions, especially via the Dark Web.
Crypto-currency Bitcoin: what are the security risks?
To hijack the blockchain system, a cybercriminal would have to manage 51% of the computing power Bitcoin relies on alone. However, in 2020, crypto-currency Bitcoin is made up of more than 50,000 nodes. It is therefore very unlikely that a cyberattack on this blockchain will ever bear fruit.
The real “risk” with bitcoin is losing your wallet or inadvertently deleting it. You will then lose all your fortune irretrievably…
Also, some sites offering to store bitcoins have defrauded their users and stolen their assets. It is therefore important to only use trusted platforms.
Exchanges can also be targeted by hackers. In 2014, Japan’s Mt. Gox exchange was hacked and the equivalent of millions of dollars in bitcoins was stolen.
When to invest in a cryptocurrency like Bitcoin?
Investing in a cryptocurrency like Bitcoin is different from any other type of investment. It is a more complex universe, which requires prudence and a taste for risk. However, there is no perfect time to start trading. All you need are the right tools and basic skills.
Which crypto to invest in?
Crypto-currency Bitcoin is the pioneer of virtual currencies. It thus remains the most popular and most beginners consider it the best crypto to date. This is why newcomers to trading choose it to begin with. Besides Bitcoin, you can also choose another cryptocurrency like Ethereum and Dogecoin.
You can consult the comparison of crypto-currencies before being sure of your choice. In addition to the comparison, do not hesitate to consult the opinions of other traders. Indeed, these currencies of the future are very volatile. It is then difficult to predict their evolution, even in a very short period of time.
And for the bank?
The choice of bank is also crucial. You must buy a cryptocurrency before investing. However, offering fast service is not one of the strengths of traditional banks. This is why it is necessary to resort to a Neobank or an online bank.
Although the two are not quite similar, their services can be accessed without traveling. If the Neobank is accessible from your smartphone, online banking requires a computer to manage your transactions.
Choose the right brokers
The number of online brokers or brokers is constantly increasing. Some are in order, some are not. Before embarking on trading, you must be sure that the brokers are in a legal situation. You should also compare the different fees (brokerage fees, withdrawal fees, etc.) and the payment system.
Also make sure that your broker has good technical support, that he can train you in this area in order to offer the maximum security for your assets. Various sites offer broker comparisons.
Mistakes to avoid
In addition, certain errors are to be avoided. It is, therefore, necessary to adopt the right strategy. In order not to get lost, you have to see the different indicators such as the RSI or Relative Strength Index and the MACD (Moving Average Convergence Divergence).
In addition, losses must be limited, by adopting stop-loss and take-profit, in order to guarantee maximum security. Finally, it is advisable to take advantage of the demo account. This is a test account where you will use fake money to trade. Such a simulation is more than useful before tackling the real world, it allows you to become familiar with the tools and the different techniques.
Companies are investing in crypto-currency Bitcoin and pushing it past $50,000
On February 16, 2021, Bitcoin surpassed the value of $50,000 for the first time in its history. This record is notably linked to the investment of several large companies which have decided to convert their cash into crypto-currency.
Thus, the previous week, Tesla had announced that it had purchased the equivalent of $1.5 billion in Bitcoin. In the future, the automaker also plans to accept BTC as payment for its vehicles. This strongly increases the interest in this crypto-currency.
At the same time, Mastercard has also decided to open its network to several cryptocurrencies, including crypto-currency Bitcoin. Other companies like PayPal and BNY Mellon have also shown their support for this new type of currency.
Now speculators are wondering about the possibility of other companies backing Bitcoin. This simple assumption is enough to explore the theoretical value of BTC.
However, some companies are more reluctant. For example, Uber admitted he was hesitant to accept crypto-currency Bitcoin as payment for his rides before giving up.
Either way, the new bitcoin boom is quite different from the 2017 boom. Back then, the price surge was driven by speculation in the retail industry. It is now linked to demand from institutional investors.
According to Michael Saylor, CEO of software provider MicroStrategy, “Bitcoin is much more stable than it was three years ago.” Moreover, MicroStrategy and Square caused a lot of ink to flow in 2020 by transforming part of their cash into Bitcoin. This new trend is expected to continue in 2021.
Tesla and crypto-currency Bitcoin: Elon Musk’s troubled game
In February 2021, Tesla created a surprise by announcing an investment in Bitcoin to the tune of $1.5 billion. Subsequently, in March 2021, the electric vehicle manufacturer also decided to accept BTC payments for its cars.
Several companies had already invested in Bitcoin in the past, such as Square Inc or MicroStrategy. However, Tesla is the first S&P 500 company to bet on the cryptocurrency.
It was a priori a positive signal, and the price of Bitcoin reached a new high following Tesla’s announcement. The digital currency reached an unprecedented unit value of 44,000 dollars, or more than 13.40% compared to the previous day. This investment directly contributed to the company’s quarterly profits, thanks to the rise of Bitcoin over the following months.
Unfortunately, shortly after, Elon Musk suddenly turned around. On May 12, 2021, just two months after starting to accept BTC payments, the CEO of Tesla decided to backtrack on the pretext of the harmful impact of cryptocurrency mining on the environment.Remember that creating new bitcoins involves using computers to solve complex mathematical problems. This process consumes a lot of electricity, and consumption increases rapidly as the number of Bitcoins increases. crypto-currency Bitcoin transactions also consume fossil fuels like coal.
This unexpected setback caused a sharp drop in the value of Bitcoin. Within minutes, the price of the cryptocurrency dropped by several thousand dollars. The next day, its value had decreased by 12%.At the same time, Elon Musk assured that Tesla did not sell Bitcoin. Yet journalist Liam Denning expressed his doubts in this regard.
According to him, it is very likely that the entrepreneur did not resist the temptation to resell part of the crypto-currency Bitcoin purchased by Tesla to deliver encouraging results to shareholders.
At the same time, the firm had to deal with declining vehicle sales in China. A drop linked to rumors, since denied, of brake failure in Tesla cars. We can think that Elon Musk wanted to compensate for this loss by selling BTC.
According to the BBC, the American company would have already sold 10% of its Bitcoins in April 2021 to improve its first-quarter income to the tune of $101 million. In the eyes of experts, it is possible that Tesla has sold even more BTC in recent weeks…
While Elon Musk’s decisions may seem risky, some simply suspect him of manipulating the market in his favor. On June 5, 2021, Anonymous posted a three-minute video addressed to the CEO.
China Wants To Regulate Cryptocurrency, Bitcoin Price Crashes
In late May 2021, Chinese Vice Premier Liu He and the State Council announced that stricter regulation of cryptocurrencies was needed to protect the financial system.
According to the official statement, it is essential to “tighten the screws” around Bitcoin drilling and trading, and firmly prevent the transmission of individual risks to the social field.
Following this announcement, the price of Bitcoin fell by 8.5%. The move only added to a long slide in BTC that has raged for several months, with more than 40% in value lost since its peak.
Other cryptocurrencies were also impacted by the Chinese resolution. Ethereum and Dogecoin lost 11% in value.
The day before, the United States had also announced its intention to be stricter against people using Bitcoin for “illegal activities including tax evasion”. Transferring cryptocurrency over $10,000 will need to be reported to the Treasury Department, just like cash.
However, the Chinese reluctance towards cryptos is related to other factors. China is the country with the most crypto-currency Bitcoin farms and mining operations consume a lot of energy.
As in all countries, authorities also fear that Bitcoin and other cryptos are being used illicitly. According to the press release, “illegal financial activities must be clamped down and severely punished to maintain the proper functioning of the stock market, debt, and international exchanges”.
In order to avoid the drifts of cryptocurrencies, the Chinese central bank was one of the first in the world to develop its own cryptocurrency based on the yuan.
Iran bans bitcoin mining to avoid power cuts in Tehran
Bitcoin mining can make a lot of money, but it also consumes a lot of energy. A lot of energy, to the point of plunging entire towns into darkness. This is exactly what happened in Iran, where the capital Tehran and other major cities have faced daily power cuts for the past few months. Some hospitals have even been unable to keep their Covid-19 vaccines cool.
While authorities initially blamed the natural gas shortage and drought, cryptocurrency drilling is now being singled out. According to the government, the energy spent on BTC is mostly consumed by illegal or unlicensed miners. The latter would represent 85% of the drilling carried out in Iran, housing only 50 officially recognized farms using a total of 209 megawatts.
At the end of May 2021, Iranian President Hassan Rouhani, therefore, banned the mining of Bitcoin and other cryptos, at least until September 22, 2021. Arrests have taken place, and even legal crypto-currency Bitcoin farms have suffered temporary power cuts…
Iran is one of the top countries for bitcoin drilling and alone accounts for 4.5% of the mining done globally between January and April 2021. In comparison, China accounts for 70% of the drilling.
The success of BTC in Iran is linked to the fact that the country allows its users to pay for imports of goods. A solution to circumvent the American sanctions imposed by the Trump administration…
El Salvador, the first country to accept crypto-currency Bitcoin as a global currency
While Bitcoin is strongly criticized by several countries including China, others support them. El Salvador wants to make this cryptocurrency a legal means of payment, just like the US dollar. A world first.
President Nayib Bukele sent his bill to Congress on Wednesday, June 9, 2021. Congress then voted in favor of the bill overwhelmingly at 62 out of 84 votes.
According to the official text, “the objective of this law is to regulate Bitcoin as a legal currency of exchange”. The Central American country wants to remove the limits that hold BTC back.
Now, in-store prices can be displayed in Bitcoin. Taxes can be paid with this cryptocurrency. Bitcoin trading will not be subject to profit tax.
One of the main criticisms of Bitcoin is the high volatility of its value, capable of reaching highs before crashing lower than the earth. For many experts, this is what prevents it from being a reliable currency. It is not yet known how El Salvador intends to remedy this problem.
The exchange rate with the US dollar will be “freely determined by the market”, according to the bill. In addition, the text plans to train the population and put in place mechanisms so that they can access crypto-currency Bitcoin transactions.
Unlike the recent escapades of Elon Musk or Chinese decisions, this announcement had a positive impact on the price of Bitcoin. This increased by 5% shortly after the vote.
