What Is Bitcoin (BTC)

Bitcoin coin with a crown on top of it

What Is Bitcoin

Bitcoin is a decentralized digital currency designed to be an alternative form of money to traditional currencies. Unlike traditional fiat currencies which require third parties such as financial institutions to facilitate transactions, Bitcoin utilizes a peer-to-peer network which allows users to conduct transactions directly with one another without the need for an intermediary. 

 

Bitcoin was introduced in 2009 and has inspired the development of a host of other cryptocurrencies. Bitcoin is undisputedly one of the leaders in the cryptocurrency space and consistently ranks as the biggest crypto by market capitalization. 

 

How Does Bitcoin Work

To understand how Bitcoin works, we need to first understand the purpose of Bitcoin and the problem that it aims to solve. In the introduction of Bitcoin’s whitepaper, it was clear that Bitcoin was designed to solve one central issue: “an electronic payment system…allowing any two willing parties to transact directly with each other without the need for a trusted third party.”

 

Traditional financial transactions require a third party to process payments. But there are inherent weaknesses to this trust-based model with centralization being one of them. Bitcoin, using a peer-to-peer network, removes the need for a third party. But without a trusted third party to verify transactions, this brings up the double-spending problem

 

To solve the double-spending problem, Bitcoin uses the Proof of Work consensus mechanism. In Bitcoin’s PoW-based blockchain, transactions are grouped into blocks. Miners, using their computational power, compete to solve complex puzzles. The miner that solves the puzzle first creates the next block and includes the transactions within it. The newly created block will then be added to the existing chain of blocks. 

 

Miners are incentivised to work on the longest chain as they are rewarded with newly created bitcoins. A malicious actor looking to execute a double spend on Bitcoin’s network would need to control more than 50% of the network’s computational power to create an alternate version of Bitcoin’s blockchain to invalidate the original transaction, making it extremely difficult and expensive to carry out. Therefore, the PoW consensus model helps Bitcoin prevent a double-spend problem.

 

Who Created Bitcoin

Bitcoin was created by a person or group using the pseudonym Satoshi Nakamoto. While a number of individuals have stepped out claiming to be Satoshi Nakamoto, the true identity of the inventor of Bitcoin remains unknown. 

 

Satoshi Nakamoto was actively involved in Bitcoin’s early days from authoring Bitcoin’s whitepaper to participating and communicating with other developers and users in the Bitcoin community. Satoshi Nakamoto was also the person/group to mine the first block of the Bitcoin blockchain, known as the “genesis block” in January 2009.

 

Satoshi Nakamoto’s involvement in the community faded over time and his last public communication was back in 2010.

 

Can You Buy Real Things With Bitcoin

One of the early examples of Bitcoin being used as a payment was in 2010 when Laszlo Hanyecz paid 10,000 bitcoins (BTC) for two Papa John’s pizzas. Since then, the adoption of Bitcoin as a form of payment has grown with many businesses and individuals now accepting Bitcoin as a method of payment for a wide range of goods and services. 

 

In fact, El Salvador and the Central African Republic have accepted Bitcoin as legal tender in their countries. This means that people residing in these countries can purchase goods and services with Bitcoin. 

 

Even in countries where Bitcoin is not officially recognized as legal tender such as the United States and Canada, many small businesses in these countries accept Bitcoin as a form of payment.

 

Here is a list of real things you can buy with Bitcoin:

  • Travel and Accommodation
  • Food and Beverages
  • Electronics
  • Watches
  • Real Estate
  • Motor Vehicles
  • Groceries
  • Furniture
  • Clothing

 

Can I Turn Bitcoin Into Cash

There are a number of ways to turn Bitcoin into cash:

 

  • Cryptocurrency Exchange

One of the most common ways to trade your Bitcoin for fiat currency is through crypto exchanges. Many crypto exchanges have on and off-ramps for you to convert crypto into traditional currencies and vice versa. 

 

  • Bitcoin ATMs

Bitcoin ATMs allow you to buy and sell Bitcoin at them. The ATMs are operated by third-party companies and users with an existing account with these companies and a cryptocurrency cold wallet can exchange their cryptocurrency for fiat currency and vice versa. 

 

  • Peer-to-Peer (P2P) Platforms

As its name suggests, P2P platforms connect buyers and sellers directly. To convert your Bitcoin into cash, you will need to indicate the amount of coin that you want to sell and the platform will link you up with a willing buyer. 

 

  • Payment Processors

As a merchant, when a customer pays using Bitcoin, you can convert Bitcoin into your preferred fiat currency through the use of a payment processor. The payment processor acts as an intermediary to verify the transaction, convert the cryptocurrency into fiat funds, and transferred it to your bank account. 

 

  • Cryptocurrency Debit Cards

Instead of loading fiat currencies in your account, cryptocurrency debit cards let you load your Bitcoin onto the card to spend it. When making a purchase, the equivalent amount in fiat currency is deducted from your Bitcoin balance on the card allowing you to spend your Bitcoin like cash.

 

Bitcoin Tokenomics

As of the writing of this article, 19,450,156 out of the total supply of 21,000,000 BTC coins are in circulation. Unlike traditional currencies whose supply can be increased by a central authority, Bitcoin has a maximum supply of 21,000,000 coins which means that it cannot be inflated in any way, helping the cryptocurrency maintain its scarcity. 

 

With more than 19 million bitcoin having already been mined, only under 2 million bitcoin are left to be created. There is also a process known as Bitcoin Halving in place to further maintain Bitcoin’s scarcity by lowering the rate of new bitcoins created over time. 

 

What Is Bitcoin Halving

Bitcoin halving, also known as the “halvening,” is an event that occurs approximately every four years where the reward miners receive for mining new blocks is halved. It is a crucial element of the Bitcoin protocol that is designed to control the supply of new bitcoins entering circulation.

 

Bitcoin Halving takes place once every 210,000 blocks are mined. The original block reward started at 50 bitcoins when Bitcoin was launched in 2009 and the reduction in block reward continues with each subsequent halving. 

 

The first halving occurred in 2012, reducing the block reward from 50 to 25 bitcoins. The second halving occurred in 2016, reducing the block reward from 25 to 12.5 bitcoins. The third halving occurred in 2020, reducing the block reward from 12.5 to 6.25 bitcoins. The next halving is expected to occur around the year 2024.

 

Through Halving, the total supply of bitcoins increases at a decreasing rate.

 

How To Trade BTC On The Flipster App

To trade BTC on Flipster:

 

  1. Download the Flipster app and complete the account set-up process
  2. Go to [Trade]
  3. Click on [Search] at the top of the page and type in BTC
  4. Click on BTC
  5. In the [Amount] field, type in the amount of BTC you wish to buy or sell. Alternatively, you can select the percentages below to choose how much of your available cash you want to use for your order.
  6. Click [Preview order] to preview your order
  7. Once you have confirmed the details, click on [Buy BTC – Long] button or [Sell BTC – Short] if you are opening a short position.

 

Disclaimer: Any opinion shared in this article is strictly the views and opinions of the author and should not be construed as financial advice. Flipster makes no judgment on the projects or the content uploaded.