Every day you hear more or read the word Bitcoin and don’t know what it’s about, what a kryptonet is, what it’s for, why it’s so popular, or you just have no idea how to use it. You’re not the first person to get it, and you won’t be the last.
For many, talking or learning about using Bitcoin is a headache, as they imagine it’s a complicated or unsafe system. Neither is true. On the contrary, even though it seems difficult, you have to learn a couple of things to start making transfers, and it’s usually a secure payment mechanism.
Before explaining in detail how Bitcoin works, the first thing is to talk about its meaning, and basic concepts.
Bitcoin is a currency and a digital system. Its abbreviation is BTC, and it’s important to note that while the platform as such is written with a capital B, the word “bitcoin” all lower case refers to the units of this currency.
As a currency, Bitcoin can be used for what any other currency works for, buying, selling, etc. But unlike traditional ones, it doesn’t depend on a central bank or any government entity to back it up, much less issue it.
It works entirely under a digital platform created by Satoshi Nakamoto, and before you go to Google to find out who he is, we save you those minutes. Although there has been much speculation about his identity, and several people have claimed to be the creator of Bitcoin, no one knows for sure the real person behind this crypto currency.
So, simply to talk about Satoshi Nakamoto is how the pseudonym of aperson or a group of people, who in October 2008 published a “white paper”, officially known as a whitepaper, about an electronic point-to-point cash system in an internet forum, and months later, in January 2009, launched the first software.
That’s how Bitcoin doesn’t belong to any government or country, and because its inventor is anonymous and established it as a free license system, it’s also not owned by any private company or individual. How do you keep it running? Well, the users themselves do it.
It is digital
Unlike the dollar, the yen, the euro or any regional currency, Bitcoin does not physically exist. It’s exclusively digital, and works through blockchain. Thanks to its efficient mechanism of verification or consensus among those involved in a transaction, it cannot be spent more than once.
Each bitcoin, total or portion, is unique. Each transaction goes to a public record in the blockchain, which functions as a digital accounting “book”, where anyone can verify that the funds really exist and if they moved from one direction to another.
Users can manage their bitcoin in digital purses. These work by means of a public key (which would be the equivalent of a bank account number), and a private key (which would be the password).
Thanks to these, financial transfers can be made from anywhere in the world at any time. It is also possible to exchange it for a local currency, thanks to LocalBitcoins or other exchange houses that exist in many countries.
Best of all, users will not be limited by the control usually established by traditional banks, which sometimes freeze accounts, nor will they be affected by the excessive commissions they usually apply. Bitcoin, however, was created to charge a small or no commission.
How Bitcoin works
After you have been properly informed, the first thing to do is to select a wallet, also known as a purse, wallet or wallet, through which you will be able to manage your funds. It should be clarified, however, that this is not where the money is stored.
The coins are registered in the blockchains. The wallets have the function of handling the public and private keys that are used to carry out transactions, either sending or receiving.
These wallets are divided into three categories. The hardware ones, which save the private key in a separate system outside the Internet (such as Ledger or Trezor); the software ones, which can be installed in a computer or mobile device, where the password is saved and encrypted (such as Electrum, Bitpay, Green or Coinomi); and the websites (such as Bitgo and Blockchain).
New users are advised to make use of software, which in addition to providing complete security, are usually free.