You will finally understand everything about Bitcoin (BTC)

We hear a lot about bitcoin in the news. But what exactly is it, how does it work, and what impact will it have on the world at large? Here’s everything you need to know

Invented in 2009, bitcoin is the crypto-the oldest and best known currency in the world. Like its various counterparts, it is also extremely volatile. While many Australian investors are blessed with its wealth-generating potential, it is rarely an easy or even successful path to wealth creation.

Cryptocurrencies are also a prime hunting ground for scammers, and a number of Australians have lost tens of thousands of dollars to cryptocurrency scams.

What is bitcoin?

In the past, people exchanged physical assets such as gold and silver for goods and services. But these goods were difficult to transport and vulnerable to theft and loss. See also: Coinbase connects Solana tokens to the protection wallet of the first EVM. So the banks offered to keep them for us, as bills that proved the wealth we had in the bank.

Eventually, the link between these tickets and the goods they had was severed. Instead, governments declared the tickets themselves valuable.

We trust banks to honor the value of our currency, so that we can accept cash as payment and others are willing to pay us.

A cryptocurrency is essentially a digital version of cash that exists outside the established framework of national governments and central and private banks. It allows two people to trade or buy and sell with it without banks like Westpac or NAB facilitating payment.

In other words, each party to the transaction is convinced that the asset being traded has intrinsic value.

How do bitcoin payments work?

Making a bitcoin payment is as easy as sending an email. See also: How to turn rising fuel prices into a good investment?. You transfer bitcoins from your digital wallet (obtained when you buy the currency from a cryptocurrency exchange) to another person’s using an app or website and the bitcoin address unique to that person.

Payments are processed and verified by a network of ordinary people with computers equipped with specialized software.

These volunteers are called bitcoin miners. They use high-end computer hardware to solve increasingly complex mathematical verification problems generated by Bitcoin’s source code – its computer DNA.

The hardware is extremely expensive, powerful and consumes huge amounts of power. We will come back to this later.

Once a payment is verified, the miner adds a record of the transaction to an online shared ledger. The record includes the sender’s and recipient’s bitcoin addresses and the amount transferred.

Entries in the general ledger cannot be edited or deleted. And because everyone’s copy of the ledger must match, it’s extremely difficult for someone to claim to own more bitcoins than they actually own, because everyone’s copy of the ledger would contradict them.

Miners do not require one transaction at a time. Transactions are grouped into “blocks” which have limited space. When a block is “full”, a new empty block is created.

Each new block links to the previous block which contains information about old transactions. The blocks form a chain that goes all the way back to the very first bitcoin transaction.

This public blockchain ledger provides an indelible, definitive, and transparent record of which wallets hold bitcoin and how much each holds at any given time, along with receipts.we who proves it.

What is bitcoin mining?

A bitcoin miner who adds a block to the chain receives a new bitcoin worth thousands of dollars. See the article: Mark Zuckerberg’s Facebook cryptocurrency project: a bank is buying the intellectual property!. It sounds like free money, but the investment needed to build and run a machine that can process a block is significant and increases over time.

About 900 bitcoins are “minted” every day. At today’s prices, their total value is over US$18 million. The total bitcoin supply is limited to 21 million. Once this attack is limited, it will no longer be possible to hit others.

Additionally, the reward for mining one bitcoin halves every four years. If the current trajectory continues, it is predicted that the last bitcoin will be mined in 2140, unless the current protocols are changed.

How to use bitcoin?

You can buy it, sell it, and use it to purchase goods and services wherever it is accepted. You don’t have to spend whole bitcoins – each can be subdivided (see below).

Bitcoin payments aren’t exactly common, but big names like Microsoft, Express VPN, and Wikipedia accept bitcoin payments.

Many people simply invest in bitcoin in the hope that its value will increase. Bitcoin reached almost $69,000 in November 2021, but its value fell by 70%. At the time of writing, one bitcoin was worth around US$20,000. The value of the cryptocurrency continues to fluctuate today, with some leading industry figures saying bitcoin’s value could stay well below its peak for the next two years.

This type of market realization raises eyebrows among regulators. The Federal Government, through its Moneysmart website, points out that cryptocurrencies are, in most cases, not blocked as financial products and therefore your cryptocurrency platform may not be regulated by the corporate regulator, the Australian Securities and Investments Commission (ASIC).

As Moneysmart puts it: “When a cryptocurrency fails, investors most likely lose all the money they have invested. »

Who can buy bitcoins?

Anyone can buy bitcoins on cryptocurrency exchanges such as Binance and Coinbase. According to a study by Roy Morgan, more than one million Australians aged 18 and over, or 5% of the population, invest in cryptocurrencies.

However, unless you have $20,000 in your account to buy a single token, you will only be buying a fraction, or share, of a bitcoin.

Bitcoin’s smaller denominations are called Satoshi, after the pseudonym used by its anonymous inventor(s). One Satoshi is worth 0.00000001 Bitcoin.

As stated earlier, bitcoin and the cryptocurrency market are unregulated. This means there are no rules in place to prevent you from losing it all, nor a watchdog to ensure that all parties involved play fair.

What do I need to mine bitcoins?

According to Connor Sephton, bitcoin expert and journalist, miners need three things to succeed: access to cheap electricity, hardware known as application-specific integrated circuits (ASICs), and mining software. which connects them to the Bitcoin network.

The best performing ASICs can cost thousands of pounds to buy and operate, making them prohibitively expensive for the average person.

Is bitcoin the only cryptocurrency?

There are countless other cryptocurrencies, collectively known as altcoins.

These include well-defined alternative currencies like Ethereum and Litecoin, as well as fledgling alternative currencies like Elrond and Clover. Each currency has different values ​​and rules, but they all follow the basic precepts of cryptocurrencies.

What are the advantages of bitcoin?

Without a middleman, there is no one to take a share of every transaction. Bitcoin is a global currency that is also easier to move across borders, and as a relatively anonymous currency, it makes transactions private.

It is also revered by many proponents of “DeFi” – or decentralized finance – because it does not depend on human guardians or intermediaries.

What are the disadvantages of bitcoin?

It is unregulated, volatile and cannot be used as widely as traditional devices.

The amount of energy used globally to run bitcoin is also massive. According to researchers from the University of Oxford, UK, bitcoin’s carbon footprint is the same as that of the whole of Argentina.

This has raised questions about the long-term sustainability of the phenomenon, especially as global economies strive to reduce their greenhouse gas emissions in line with international environmental agreements and green targets. » associates.

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Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.

Thomas E.
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