Bitcoin: understand what digital currency is and how it works

Bitcoin is a currency traded only by digital means and is the pioneer in the world of cryptocurrencies (digital currencies). Unlike ordinary currencies, Bitcoin works in a decentralized way, that is, without central control through banks or governments.

To ensure that transactions take place on a regular basis, Bitcoin and other cryptocurrencies use the  Blockchain  . This system guarantees the viability of the currency, making all operations on the network public, in addition to avoiding double counting of cryptocurrencies.

How does Bitcoin work?

Bitcoin works as a type of file exchange on the Internet, but to exchange currency and information about transactions.

Through the Blockchain system, each Bitcoin transaction is verified and approved by various computers that carry out this work around the world.

The system is protected by all the computers that volunteer to work and have to solve complex math problems to pass each operation.

This process, known as “mining”, aggregates the information of the operation in digital blocks. Therefore, together they form a kind of ledger, hence the name Blockchain.

The information in the block is protected by a code known as a  hash  or  proof of work  , which also guarantees that the system is interconnected, since each block has its own  hash  and that of the previous block.

Bitcoin is a currency that only exists in the digital environment. Therefore, to buy or pay it will be necessary for the user to have a password-protected online account, and this part is not exposed to the network like Blockchain operations.

The creation of more Bitcoins is also controlled by the system, which emits less and less and is programmed to stop when it reaches 21 million Bitcoins in circulation.

These amounts are issued to new buyers and coin miners.

The value of Bitcoin is derived from other currencies, such as the dollar, and is determined by supply and demand. That is, with an intense increase in demand, more dollars are needed to acquire the cryptocurrency.

If you are interested in learning more about how Bitcoin works, have a better understanding of how the Blockchain system works.

How to buy Bitcoin?

To carry out transactions on the Bitcoin network, it is necessary to create a “virtual wallet”. Wallets in the Bitcoin system are made up of two cryptographic keys: one public and one private.

Blockchain will use the public key to know the transactions, while the private key that only the owner of the account knows and uses to carry out its operations.

The user who wants to obtain Bitcoins must provide a document number that identifies him, such as the Individual Taxpayer Registry (CPF).

There are different companies that perform this service over the Internet, but first it is recommended to know their reputation well and investigate the experiences of other users.

To complete the process and start buying the cryptocurrency, you will need to exchange reais, providing a bank account or a credit or debit card that connects directly to the account.

Origins of Bitcoin

Bitcoin emerged in late 2008, being featured in a  white paper  by an author named Satoshi Sakamoto, whose true identity has never been revealed.

Through this document, the functionalities of the cryptocurrency and the Blockchain system were presented as guarantors of the operations.

In January 2009, the first block containing 50 Bitcoins (BTC) was mined, officially launching the digital currency. Starting this year, the Bitcoin technology expanded and updated in new versions, until it started to grow from 2010.

In recent years, Bitcoin has attracted the attention of investors as it is an independently acting currency. Furthermore, its market value grew exponentially, reaching $ 19,000 at the end of 2017.

After the creation and success of Bitcoin, other digital currencies, known as  Altcoins  , were created with different characteristics and parameters from their predecessors.

Is Bitcoin a safe currency?

Despite not being a currency controlled by any institution, Bitcoin has gained a large following in recent years due to a secure system, such as Blockchain.

In addition to the system, the Bitcoin market is made up of companies that act as a platform for buying and selling. And some of them have already suffered virtual attacks.

The largest of these attacks occurred in 2014, when MtGox was robbed at $ 473 million, leaving all of its customers without Bitcoins.

The  schemes  pumping and download  or pyramid also been carried out amid criptomonedas where a financial promises high performance users are encouraged to attract more people to the scheme.

As an investment, you need to understand that both Bitcoin and all other cryptocurrencies have value derived from uncertain market behavior.

In short, you can appreciate and devalue yourself. Having Bitcoin as an investment means having a variable income, which can generate profits or losses.

But if you want to understand how this investment can work, learn more about investing in equity.