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What is Bitcoin and how does it work?

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The plan is to limit the stock of Bitcoins to 21 million pieces, which limits the risk of inflation. These stocks are being “mined”, i.e. they are generated by Internet users who use complex computer programs to do so.

The stock of bitcoins, set at 21 million units, has not yet been fully mined. At the beginning of 2021, there were already just over 18 million Bitcoins in circulation. However, the production rate of the currency is halving every four years, so the issuance of new Bitcoins is slowing down. It is estimated that the last Bitcoin will be mined around the year 2140.

The price of Bitcoin can also vary from platform to platform, depending on the amounts traded.

What is Bitcoin used for?

Bitcoins are used as a direct means of payment online. But they can also be exchanged for dollars or euros on certain exchanges. Even physical currencies have been launched that can be purchased online with virtual Bitcoins or with traditional means of payment. However, they remain largely in the minority.

How do you get your hands on Bitcoins?

To get Bitcoins quickly and easily, you have to use online platforms where you can buy them against euros or another currency (coinbase, binance…).

With most of these platforms, buying Bitcoins is a three-step process.

First, you have to open an account on a platform that sells cryptocurrencies by creating a username and password. You can then deposit funds into this account by bank transfer in euros or another currency.

Next, the user must consult the website’s order book. This order book lists the prices at which Bitcoin sellers are willing to exchange the virtual currency for euros or another currency.

Finally, you have to place an order with a buy limit price, i.e. the maximum price at which you are willing to buy bitcoins. The order will only be executed if a Bitcoin seller offers a price less than or equal to the buy limit price. Once the order is executed, the user’s account is replenished with Bitcoins and his stock of euros or other currencies is transferred to the Bitcoin seller.

It is also possible to sell bitcoins in exchange for euros or other currencies via a sell order. On most platforms, it is then possible to transfer euros to a bank account by wire transfer.

This means that a purchase of Bitcoins is not irrevocable. However, it is important to be aware of Bitcoin price fluctuations, which can be favorable or unfavorable for the user.

How can I spend my Bitcoins?

To pay a seller of goods or services in Bitcoins, you need to obtain an “address” from them. An address is a sequence of letters and numbers to which the buyer sends the amount of Bitcoins due to them.

To obtain such an address, a software wallet is needed. A software wallet can be installed on a computer (e.g., with the Bitcoin-QT software) or on a smartphone (Bitcoin Wallet). The software wallet not only receives these addresses when you are a buyer, but also generates them when you are a seller. Therefore, each user must have his own software wallet.

Smartphone wallets sometimes allow you to pay in physical stores simply by scanning a code that appears on a screen. A very small number of stores, restaurants or hotels accept Bitcoin payments, but their number is constantly growing.

There are also web wallets: instead of being installed on a specific computer, the web wallet is available online from any computer, provided you have the username and password. However, these wallets are much less secure than software wallets.

Thus, Bitcoin transfers are done through this address exchange game: The exchange of Bitcoins is similar to the exchange of emails. But even more than with emails, it is crucial to secure one’s Bitcoin wallet, especially by regularly backing up the wallet.

A new use for Bitcoin: ICOs.

The process of taking a company public is known in English as an IPO (initial public offering). An ICO (initial coin offering) is a somewhat similar process, except that capital is raised in virtual currencies, of which Bitcoin is the best known, and ownership of a company is not acquired. In most cases, the funding is for a new blockchain or an application based on an existing blockchain. This type of funding can be similar to crowdfunding in that the public can fund a startup directly with Bitcoin. These ICOs are conducted in unregulated markets, which poses a higher risk to investors.

How are bitcoins created?

Purchasing from designated platforms is not the only way to get Bitcoins, although it is easy and fast. In fact, Internet users can also participate in the process of creating new Bitcoins and obtain some in this way. This is called “bitcoin mining”.

A new user who wants to settle for buying bitcoins through the designated platforms does not need to know how bitcoins are created. However, a curious user may be interested in this process.

To ensure the credibility of the system, it is necessary to verify the authenticity of the payer and the availability of the money when making a payment with Bitcoins. For this reason, a control process is introduced: In particular, the Internet users who are members of the network – the “Bitcoin miners” – invest in computer equipment that they contribute to the system to ensure its proper functioning and security. The computers of these Internet users then compete with each other to develop complex mathematical functions to validate the validity of the transaction. The winner of the validation is rewarded with newly created Bitcoins.

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