(Approximate reading length: 15 minutes)
If you have ever wondered what the leading crypto-currency Bitcoin is, then you have come to the right place. In this guide, I will try to help you understand crypto-currency and its general structure. Hopefully, by the end of this guide, you will be sufficiently informed about what Bitcoin is, and how it works.
Bitcoin and its working principle are based on a coding infrastructure. Therefore, it is a crypto currency which allows currency transfer between users while also removing bankers or other middlemen. Moreover, by Bitcoin’s nature, it does not have a physical centre of operations.
The Story of the Leading Crypto Currency Bitcoin
In order to truly understand what crypto-currency is, we must first take a look at the story and the process which led to its creation.
Bitcoin was first announced to the entire World in 2009, and it has gone down in history as the first crypto-currency. A crypto-currency is essentially a currency which is protected by Cryptography. In other words its protection is provided by complex mathematical algorithms.
Satoshi Nakamoto is the founder of Bitcoin, which goes without saying.
Satoshi explains the purpose of Bitcoin as: “Bitcoin’s purpose is to provide a currency type which is independent from central authorities, and between new partners.”
On the other hand, another opinion suggests that it was offered as an alternative to major banks and central authorities who lost their partners’ trust during the 2008 financial crisis.
Properties of Bitcoin Operations and Transactions
The properties of Bitcoin’s operations and transactions provide several benefits, which we will take a look at and try to explain down below.
Anonymous: None of the operations require ID clarification. Bitcoin operations only require a unique code which consists of approximately 30 characters. This code is similar to IBAN numbers in nature. Even operational management can be done while keeping the partners completely anonymous.
Fast and Global: Any operation can be done on the internet, and will be approved within minutes. There is no difference between making a transaction with a partner in the same town, or another partner in the other half of the World. Bitcoin completely removes distances.
Secure: Bitcoin funds are protected by password coding system. Only the person who has access to the said password code can make transactions. With a strong password code, it becomes nearly impossible to crack or hack the said codes.
Independent: You do not need authorization from anyone to use crypto currency. Transactions can be done with free websites or softwares. No one has the right to stop you from doing so.
Significant Years and Events for Bitcoin
Bitcoin has witnessed several events since its foundation. Some of these events have affected Bitcoin positively, while some of the other events have affected it negatively. However, most notable of these events have occurred over the recent years.
Important dates 1
31 October 2008: Technical examinations of Bitcoin introduced.
3 January 2009: Bitcoin found.
12 January 2009: First Bitcoin transaction completed.
16 December 2009: Version updated to “0.2”
6 November 2010: Market value exceeds 1 million dollars.
October 2011: Bitcoin introduces another crypto currency named “Litecoin”.
3 June 2012: Block #181919 was formed with 1322 operations, which went down the record books as the biggest Block to be formed to date.
June 2012: Coinbase was introduced to the Market.
27 September 2012: Bitcoin foundation was found.
7 February 2014: Mt. Gox crypto currency website was hacked.
June 2015: BitLicence was found, which went down in history as one of the most important currency coding regulations.
1 August 2017: Bitcoin decided to create “Bitcoin Cash”.
September 2017: China passes a law to forbid usage of BTC across the country.
Important dates 2
December 2017: The first Bitcoin process with maturity model deal was reached between CBOE Global Markets and Chicago Board of Trade.
September 2018: Crypto currencies were devalued by %80 compared to their value in January 2018, which was worse than Dot-Com “balloon” devaluing by %78.
31 October 2018: Bitcoin celebrates its 10th birthday.
15 November 2018: Bitcoin’s market value fell below 100 billion dollars for the first time since October 2017.
August 2019: New Zealand government put forward the idea of possibly paying workers salary with Bitcoin.
How was Bitcoin formed?
Bitcoin is not made in a Mint, but rather by using computers capable of solving complex mathematical algorithms.
During Bitcoin’s development process, Satashi Nakamoto announced that only 21 million Bitcoin was going to be put forth and that this limit was going to be preserved. The produces Bitcoins were going to be distributed randomly in the internet.
In conclusion, since no more new Bitcoin is going to be produced, it is only possible to solve certain algorithms that can be found on the internet. However, this process requires a lot of information computing power. Moreover, if the “Bitcoin miners” manage to crack one of these codes, they will only be eligible for a certain sum of rewards.
Bitcoin as an Investment Tool
Bitcoin as an investment tool is an irregular crypto currency with an ever changing market value, which is also highly speculative.
Those who want to invest in Bitcoin must be aware of the great risk they will be taking, and never forget that there is a possibility of losing in this investment.
The upsides of Bitcoin investment are being able to transfer currency from anywhere in the world and being able to withdraw currency from any exchange market regardless of the user’s location.
What Sort of Technology is Behind Bitcoin?
The technology behind Bitcoin is called “Blockchain”. Blockchain helps form a structure which is shared and protected by users coming from across the globe with the common purpose of making investment.
The purpose of the Blockchain system is to prove that the transactions done with Bitcoin are indisputable, and prevent the “double-spending” of the same set of Bitcoins.
Many projects which aim to change the way the world works, have found themselves a home within the Blockchain technology.
Where to Buy Bitcoin?
Bitcoin can be bought from websites which are found solely for BTC transactions, and verified as secure websites. These websites are the main source for Bitcoin transactions.
Websites such as Etoro and Bitfinex are noteworthy, as they are known as the websites in which most of the transactions from US and UK are made.
For Turkey, websites such as btcturk, bitlo, dpara can be shown as leading examples.
Platforms like Coinbase, Etoro, and Bitfinex are priority targets for hackers. Therefore, keeping your crypto currencies in your “Digital wallet”, and making transactions only from designated and verified websites will provide maximum security.
Bitfinex was a target for a massive cyber-attack in 2016, which resulted in 72 million dollar worth of Bitcoins being stolen.
How to preserve/store Bitcoin?
As pointed out in the previous paragraph, users need to store their Bitcoins in their digital wallets as soon as they purchase them. But what exactly is this “Digital wallet”? How is the “storing” process done for Bitcoin?
This wallet is essentially a code that consists of letters. It is a virtual account which allows its users to buy or sell Bitcoin. Simply, it can be thought as an IBAN number. However, it differs from an IBAN number as it is not linked to a centre or an organization, thus accumulating all the responsibility only to the digital wallet owners themselves.
Digital Wallets! But What Type of Wallet?
Several wallets with different security levels are available for the users to choose. The users can choose any of the web, desktop, mobile, hardware, or even physical versions of these wallets.
Users should choose one of these wallets with different security levels, depending on their own personal needs.
The web and mobile version preserve the history of transactions, helps users control their wallets, and makes all of these possible while being connected to the Bitcoin network.
Coinbase has managed to become a successful pioneer by providing maximum security to its users, both on web and mobile versions.
Desktop wallet can be used by downloading and installing a software which allows users to store their crypto currencies.
On the other hand, it is suggested that hardware and physical wallets are the safest of the available methods.
Physical wallets, as its name suggests, makes it possible to store Bitcoin even if you are offline. It is created by generating a public address and a unique code.
Users must preserve these wallets and their unique codes. Because if the user loses the access to the wallet or the code, they will lose its contents and there might be no way to revert this loss.
What are the Advantages of Bitcoin?
Bitcoin’s most prominent advantage is being away from centralization. Therefore, you can reach international deals without worrying about exchange rates or extra fees. Moreover, there is no government intervention to Bitcoin- apart from China, of course. If product is being purchased with Bitcoin, there is an upside for the seller; Bitcoin cannot be returned.
Another advantage is Bitcoin’s indifference to inflation. You can learn more about this in my other writing in here: Crypto Currencies and Inflation.
Famous Businessmen on Bitcoin
Positive approaches 1:
Bitcoin’s founder Satoshi Nakamoto: A lot of people in 1990 rejected the idea of a virtual currency because of failing banks of the time. I think the reason of this failure was the centralized nature of the system back then. Therefore, we found a decentralized currency, Bitcoin…
Virgin Galactic’s founder Richard Branson: In my opinion it is working and it will work, but not necessarily only Bitcoin. It could be any other one of the crypto currencies.
Microsoft’s founding partner Bill Gates: Bitcoin is a technological power.
Positive Approaches 2:
Choose Yourself’s author James Altucher: This advancement has already started a long time ago, but it will peak in the future years.
PayPal’s founding partner Peter Theil: Bitcoin is the first step of an amazing process. A currency that does not belong to a government is a required and a necessary system. But it is important to build trust during this process, and that needs more time.
Statistician and Risk analysist Nassim Taleb: An eye-catching success story. Forming a truly unique digital currency is a great power. A lot of people will create their businesses based on this system.
Founder and president of X Prize Foundation, Peter Diamandis: A system which removes the need for banks, exchange fees, and money transfer fees. All of these things are great.
Risk Protection Fund’s Manager Mike Novogratz: %10 of my net worth is in this sector.
Crypto-currency developer and President of Bloq Inc. which contributed to Bitcoin, Jeff Garzik: When I first heard about Bitcoin, I thought it was too idealistic and unrealistic. How could we purchase a currency that is completely virtual? I could not understand at the first glance, but when I started researching, it started making sense.
President and CEO of CBOE, Ed Tilly: Like it or not, people love experiencing Bitcoin and they keep demanding.
A software developer based on London, Amir Taaki: Bitcoin was found with the purpose of providing a free, uncensored, and with equal accessibility for everyone.
Bitcoin Chaser’s Founder Marc Kenigsberg: Blockchain is a technical process. Bitcoin is the first product in which this process emerges.
Litecoin investor and former Director of Engineering at Coinbase, Charles Lee: Crypto currencies are powerful enough to overthrow governments.
Positive Approaches 3:
Bitcoin’s Angel Investor Roger Ver: Bitcoin is the most important invention in the history, only second to the internet.
Nobel Peace Prize Candidate Leon Luow: Every educated person must inform themselves of Bitcoin, because every notable development in the world from now on might be based on it.
One of the founders of SiteAdvisor, Chris Dixon: Currencies have three different bases: Commodity base, Political base, and now for the first time Mathematical base.
Former US representative and President Candidate, Ron Paul: I can see the influence of crypto currencies on politics, and I want it to be immune to government intervention, and legal everywhere.
Former President of Turkish Republic Central Bank Murat Çetinkaya: Digital currencies are coming with brand new risks. Despite this, I believe that digital currencies can be a valuable asset for and economy which does not use hard cash. Moreover, the technology could be used to increase efficiency and speed in the economic system.
Positive Approaches 4:
Finnish Central Bank: Bitcoin is a process that is independent from any organization which works by a protocol. Bitcoin is also a monopoly. Monopolies are usually subjects to regulations from authority in order to prevent or decrease abuse.
Former Finance Professor at Syracuse University, Dr. Boyce Watkins: Everyone should direct their investments towards Bitcoin.
Coinbase General Manager Brian Armstrong: Overstock was the first million dollar worth website which allowed payments with Bitcoin. Now there are a total of 10 these websites.
CEO of MegaUpload Kim Dotcom: A very important advancement which could help improve the process of forming currencies in the world. I hope that in the next 10 years we will see it as a prominent method of payment for salaries, and money transfer.
McAfee’s founder John McAfee: There is no way to stop the likes of Bitcoin. They will be everywhere around the world, and it will become a necessity to prepare for it.
CEO and the biggest shareholder of Berkshire Hathaway Investment Company, Warren Buffet: I can say for certain that the crypto currencies will be removed for good. However I do not know how or when this is going to happen.
President of Executive Board of JP Morgen, Jamie Dimon: Stop asking me about it. Even if Bitcoin’s market value exceeds 20 thousand dollars, my opinion of it being a fraud will not change.