What are Bitcoin and Cryptocurrencies
Before unveiling the history of the great Bitcoin, we must first define what a cryptocurrency is. These 2.0 currencies represent virtual currencies, but often have real value. For the most part, they run on decentralized blockchains. This means that they are not run by a state or by banks. We will now see in more detail the creation of these assets of the future, and what they really represent.
A little introduction of the Bitcoin King
Created by Satoshi Nakamoto, Bitcoin (BTC) is the most famous cryptocurrency in the world. It dominates the market at around 50% of the total capitalization. This project is the precursor of virtual currency and the first blockchain in history. New Bitcoins are created by miners and managed by a blockchain based on an open source system. Everyone is able to make their contribution to its functioning.
The concept of cryptocurrency
A cryptocurrency is a virtual currency that allows transactions to be carried out through cryptographic validation. They can then be traded on exchange platforms.
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The transactions are accompanied by fees, often close to zero, which make it possible to remunerate the nodes of the network. These nodes are responsible for the operations of a blockchain and validate transactions, thus freeing themselves from trusted third parties: no more banks, states or other financial institutions.
It was in 2008 that the concept of cryptocurrency was born, with Bitcoin. Its goal was simple and is still relevant today: to optimize international transactions by freeing themselves from intermediaries, in whom trust has become fragile. Transparency and security are the watchwords here.
15 years after the start of this new era, there are many cryptocurrencies, more than 10,000 listed. Many are specialized in a certain topic, however the main advantages, in a general way to cryptocurrencies (but in particular to Bitcoin), are the following ones:
One of the strengths of cryptocurrencies is the inviolability and resilience of information. This security is ensured by two main mechanisms:
- The decentralization, which involves replication of all the blocks in each network node. This prevents any possible loss of data.
- A cryptographic mechanism, by which the code of each block is linked to the code of the one that precedes it. Modifying a block would therefore modify the entire chain.
The absence of intermediaries
A blockchain works transparently, and when this transparency is associated with the technology used by blockchains, this produces sufficient confidence for users to carry out exchanges without needing the control of a third party (Bank, State…). We can even say that the mechanism of some blockchains completely eliminates the notion of trust.
The computing power and space accommodations are provided by the nodes of the network blockchains. As a result, the creation of a cryptocurrency makes it possible to remunerate infrastructure costs.
For example, for the Bitcoin blockchain, miners ensure the operation and validation of transactions. They also provide the hardware, computing power and storage space. In exchange, they receive cryptocurrency as a reward, resulting in particular from the fees paid by users.
Bitcoin (BTC) is the very first cryptocurrency in history. It was created in 2008 by a man nicknamed Satoshi Nakamoto. His real identity is still a secret to this day.
It wants to be a real currency. However, its value currently remains very volatile, so it is impossible to assign a fixed price to it. In addition to this volatility, Bitcoin is hardly recognized by governments or banks, which does not help the stability of its price. Nevertheless, some countries, such as El Salvador and Paraguay have started concrete steps to have it recognized as a currency having legal tender in their territory, since June 2021.
There is obviously a definite conversion between Bitcoin and fiat currencies, but the rate varies continuously, hence the importance of following market prices when buying and selling Bitcoin.
The amount of Bitcoins
It is currently still possible to get hold of new Bitcoins that have never been traded on the network. You should still know that there is a limit to this and that everything is planned and written in the source code. In 2140 (approximately), the 21 million Bitcoins will have been created, and once arrived at this milestone, no more will see the light of day. Note that we are already at more than 19,500,000 BTC in circulation on the network. Every 4 years there is an event called Halving Day. This day marks the division by 2 of the rewards allocated to miners, making new Bitcoins slower to produce.
Each Bitcoin is divisible into 100,000,000 individual units, which makes it possible to hold even a very small amount.
Moreover, in homage to its creator, the community decided to call the smallest unit of Bitcoin, a “Satoshi”. So remember, that 1 Satoshi = 0.00000001 Bitcoin.
The Bitcoin blockchain
Its blockchain is said to be “transparent and anonymous”.
- All past transactions are written to the blocks of the public blockchain. We can therefore see all the exchanges made.
- Anonymous, because it is impossible to directly know the authors of the transactions. We only see the addresses of the Wallets.
The objectives of Bitcoin
Like all currencies, Bitcoin is primarily used for transactions. But the main difference is that during a transaction, we are in a P2P (peer to peer) network, only the buyer and the seller are concerned, without necessarily needing the intervention of another entity.
Nevertheless, the total transactions carried out in Bitcoins, compared to the euro or the dollar, remain low. There are several reasons for this:
- There is no cash. All transactions are made exclusively online. This reduces the total of the audience concerned.
- It is by no means mandatory for a professional or any seller to accept payment in Bitcoin, since cryptocurrency is not yet truly recognized. All the same, this tends to evolve strongly positively.
- Bitcoin miners prefer to speculate, that is, to wait for the value of the currency to change in order to buy or sell.
Bitcoin is showing itself more and more as a true safe haven, which can be a much better investment than gold. Huge investment funds are starting to convert part of their capital into Bitcoin, in order to diversify. As time goes on, trust therefore grows sharply, as does its value.
Other pioneer projects in cryptocurrencies
We will quickly go over the other major cryptocurrencies in this world. First, know that any other cryptocurrency that is not Bitcoin is an Altcoin.
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Vitalik Buterin, founder of Ethereum, presented the project in 2013. The Ethereum network was designed to be able to offer an open and decentralized blockchain, allowing new crypto developments to create applications, based in particular on the concept of “Smart Contract”. Ethereum cryptocurrency makes it possible to operate and interact with the entire network.
Real-time payment system project, the Ripple was presented in 2012. This project does not aim to revolutionize our monetary system such as Bitcoin. It wants to offer a platform to facilitate international banking exchanges. This by replacing the current international payment system SWIFT.
Litecoin is a peer-to-peer internet currency, which allows instant payments, with costs close to zero anywhere in the world. Litecoin’s global payment network is open source, and fully decentralized, with no central authorities.
Compared to Bitcoin, Litecoin transactions are faster to confirm and have increased storage efficiency. Litecoin is a proven, complementary way of commerce to Bitcoin.
Dash was originally launched in 2014 as “Darkcoin”, with an emphasis on user anonymity and privacy. It has since undergone major readjustments, and its goal now is to position itself as a real alternative to bank cards and cash. Dash has partnered with over 5,000 service providers and retailers!
It should also be noted that Dash has recently embarked on DeFi (decentralized finance).