Bitcoin works like money because it allows for safe, cheap, fast and free payments around the world. It is becoming more and more accepted and more people want to buying bitcoins.
To put things into context, here's how Bitcoin works:
- Bitcoin is at the same time a protocol, a payment network and a currency.
- It was originally proposed as a concept in 2008, but was launched in January 2009 by Satoshi Nakamoto.
- By the end of 2023, there are at least 85 million active Bitcoin wallets.
- The number of merchants now accepting Bitcoin has increased exponentially. In the United States, about 36% of small businesses accept Bitcoin, and 56% use it in some way for their benefit.
- Currently, every month, more than a million new users come to Bitcoin.
- The Bitcoin network is the most secure network in the world and by the end of 2023 it was already processing more than 600.000 transactions daily.
The revolution Bitcoin is causing lies in its design and how it works
Bitcoin is made up of a consensual network that enables a new payment system with a fully digital currency. It's the first P2P payment network (peer-to-peer), being decentralized and driven by its users without a central authority or intermediaries. From a user point of view, Bitcoin is like money. Bitcoin may be the only one triple accounting system existent.
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how bitcoin works
Bitcoin is a digital currency that operates on a network called blockchain, which is like a public record of all transactions made. Unlike traditional money, Bitcoin is not controlled by a bank or a government, but is managed by its users through a decentralized system.
When someone sends Bitcoin, that transaction is verified by other users on the network called “miners.” Miners use powerful computers to solve mathematical problems that validate transactions. Once validated, the transactions are grouped into blocks, and those blocks are connected to each other to form a chain, hence the name “blockchain.”
Bitcoin's security comes from all participants having a copy of the ledger, making it very difficult to alter or falsify. Additionally, there is only a limited number of Bitcoins that can be created (21 million), making it different from traditional currencies, which governments can print as needed.
How is the price of Bitcoin determined?
Bitcoin price is determined by supply and demand (see How the Bitcoin price is determined). In addition, bitcoins work through programs called wallets (see How Bitcoins Are Stored).
What makes Bitcoin special is not that it is a digital currency. The euro, dollar, or other currencies are also largely digital, and it's digital money that has been around for decades. Almost all the money that exists is digital. Nor does it make it special that you have low transaction costs, or that you make quick transactions.
These and other features will eventually be offered by banks as well. The main difference, what really makes Bitcoin magical, is that it is a P2P network: no one issues the money.
Basics of How Bitcoin Works
Bitcoins are not files: there is no concrete thing that refers to a bitcoin. The approach to how bitcoin works is different. Bitcoin is the accounting unit for the balances that the blockchain manages. What each user has is a key (a password) that manages an address (or account number) on the blockchain. blockchain (the core of Bitcoin, your distributed ledger).
- Bitcoin: refers to the transaction network; it can be used for all kinds of applications; bitcoins are sent in transactions; all transactions are stored pseudonymously in an accounting ledger called blockchain.
- Bitcoin (BTC): unit of account of the Bitcoin network; there will never be more than 21 million and they will be created over the next 100 years; each bitcoin is divisible into 100 million units; its price fluctuates according to supply and demand.
- Blockchain: public, distributed ledger where all bitcoin transactions (and their balances) are stored permanently. Thanks to “mining,” blockchain is known as the most secure and truthful database in existence.
- Mining: The process by which transactions on the Bitcoin network are verified using advanced cryptography techniques and specialized hardware (“miners”): a fixed number of bitcoins are created (“mined”) during the process (See What is mining bitcoins).
If you want to get started in the world of Bitcoin, you can take the course that we have shown you above and which is free, or open an account here, where you will also receive €15 in Bitcoin as a gift.
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