Bitcoin is the most famous cryptocurrency on the market. Conceived by the mysterious Satoshi Nakamoto, the digital currency continues to increase in value year after year. Now is the time to learn all about cryptocurrency, from its inception to today.
The term Bitcoin is the assembly of two words of English origin: bit (the binary data unit) and coin (currency in the language of Shakespeare). Virtual currency was first mentioned in 2008 by an individual (or group of individuals) who calls himself Satoshi Nakamoto. It is a pseudonym. We still do not know to whom we really owe the creation of Bitcoin.
Anyway, this mysterious Satoshi Nakamoto stands out today as one of the biggest fortunes in the world. The person, or group of people, behind this pseudonym is among the 50 richest individuals in the world. It is estimated that Satoshi Nakamoto currently holds, through his own wallet on the blockchain, 980,000 bitcoins, or more than 58 billion euros.
What is a cryptocurrency?
Bitcoin does not work like the Euro, the Dollar or the British Pound, it is a cryptocurrency. Bitcoin is a digital monetary unit that does not depend on any authority and any financial institution. No centralized body therefore regulates cryptocurrency. This was also the avowed objective of Satoshi Nakamoto in the Bitcoin white paper: to escape financial institutions and offer a completely independent currency. In this way, it is impossible to devalue a virtual currency.
If Bitcoin is not regulated by any institution and by any bank, the currency does not escape certain rules. In the absence of authority to regulate Bitcoin, its value is indeed entirely determined by the law of supply and demand. This is why its course is so variable. But that's also why it's possible to make colossal gains in just a few hours. Note that it is also possible to lose money. Ultimately, the value of Bitcoin is based on the trust attributed to it.
Despite the currency's detractors, Bitcoin has established itself as a real currency in recent years. The BTC indeed fulfills the three functions of money as defined by Aristotle: medium of exchange, unit of account and store of value.
What is Blockchain?
One might think that transactions made with Bitcoin are out of control. This is not the case. In order to guarantee the security of its users, the creators of Bitcoin invented blockchain technology. The blockchain (or chain of blocks in French) is at the heart of the very principle of Bitcoin.
Blockchain is the technology that makes it possible to store and transmit information in a totally transparent and 100% secure way. The blockchain is a huge database made up of all the transactions carried out by its users. When two people exchange Bitcoin via the blockchain, their transaction is encoded on the blockchain network and then locked.
This transaction is called a “block”. The blockchain is made up of all the transactions, and therefore all the blocks designed by the users. Other users do not have access to this block and therefore cannot modify its content. You will understand: no one can take your bitcoins. Contrary to what many internet users think, Bitcoin is not anonymous. The technology is pseudonymous. It remains very easy to trace an Internet user by finding his wallet on the blockchain.
All active developers of the blockchain network validate and vouch for each exchange. For an individual to modify a blockchain, he needs the approval of all the other members of the blockchain. It's impossible. If the authority is decentralized, it is not for all that non-existent. Similarly, the Blockchain is not stored on single servers but on all computers in the network. Each user therefore stores part of the blockchain on their device. Each device on the network is called a “node”.
Like any other computer program, the Bitcoin protocol updates itself regularly to improve its efficiency. At the end of 2021, the Bitcoin blockchain received the Taproot update. This massive upgrade will make simple transactions indistinguishable from transactions involving multiple signatures, improving network privacy and reducing transaction costs.
Bitcoin is not the only cryptocurrency to work through a blockchain. Most of the 5,000 cryptocurrencies listed by CoinMarketCap work thanks to the blockchain, such as LiteCoin, Ether and its Ethereum platform, or even Dogecoin, Shiba Inu or BNB.
How is Bitcoin created?
The process of creating Bitcoin is called mining. This is a set of very complex computer calculations that encrypt each transaction. It is thanks to mining that exchanges made in bitcoins are ultra secure. To mine Bitcoin, you will have to arm yourself with powerful computer equipment, an ASIC.
In other words, Bitcoin is only the result of a large-scale computer calculation carried out by hundreds of computers. As with silver and gold, and with all traditional currencies, the amount of Bitcoin that can be mined is limited. Satoshi Nakamoto voluntarily imposed a limit in the Bitcoin code. It is indeed impossible to exceed 21 million units of Bitcoins: the computer code of the blocks of the blockchain simply does not allow it. It is estimated that the limit will not be reached until 2140. It is this intrinsic scarcity that gives Bitcoin its value.
What is the impact of Bitcoin mining on the environment?
Mining Bitcoin requires keeping powerful machines running continuously. Unsurprisingly, this process consumes a lot of electricity. According to an analysis by the New York Times, it currently takes “13 years of household electricity” to mine a single BTC. Bitcoin's power consumption is equivalent to that of a US state like Washington. It even exceeds the energy consumption of Finland, a country of 5.5 million people.
The queen of cryptocurrencies even consumes 7 times more electricity than all of Google's infrastructure. This is less than the banking sector. Cryptocurrency would consume 113.89 TWh/year, twice as much as the banking sector (238.92 TWh/year) and gold mining (240.61 TWh). However, it should be noted that most Bitcoin mining farms rely on green and renewable energy, such as hydroelectric power. In addition, many players in the sector are currently working to reduce the ecological footprint of mining.
How to buy Bitcoin?
To buy a Bitcoin, or a fraction of Bitcoin (the satoshis or sats), it's quite simple. All you have to do is go to an online trading platform. Most of these platforms are accessible via an application available on the Google Play Store or on the App Store. Among the best known are Coinbase, Crypto.com and the unmissable Binance. On these platforms, you can exchange your Bitcoins, convert them into euros, Ether, USDT (a cryptocurrency whose price is stable) or BNB. Most exchanges offer to deposit money with a credit card or via bank transfer.
How to make money with bitcoin?
There are several methods to make the Bitcoins you have purchased grow. Experts have defined several ways to invest in cryptocurrency. Depending on your objectives, your starting bet and your greed, you will have to define your investment tactics. Similarly, you can decide to bet on the short term or on the long term. Before continuing, we remind you that every investment carries a risk.
If you want to bet on the long term, we will advise you the “Hold” method. Deposit a small sum in Bitcoin, forget it for a few years and then come back to see if your initial bet has made small. Nothing prevents you from taking a look at the course and the trends from time to time but in any case, you will not resell your Bitcoins. In this tactic, you predefine an amount from which you will consider selling.
Another popular investment method is the DCA (Dollar Cost Average). This practice consists of regularly depositing a defined sum on a wallet. For example, you can invest 15 or 50 euros every month. This tactic makes it possible to smooth the entry price of investors and not to exit a large sum at once. Many platforms make it possible to invest in DCA, including the French firm StackinSat.
More risky but sometimes more profitable, the method of the trader consists in buying and selling in a short period of time. You buy a fraction of bitcoins when the price is at its lowest, and you sell when the price is at its highest. To achieve your goals, you will have to try to predict the market price. If you have strong nerves, you can give it a shot. Warning: this is by far the riskiest method!