Definition and operation of Bitcoin (BTC)

Definition of Bitcoin

Bitcoin is the first ever virtual currency created by Satoshi Nakamoto, triggering a real revolution in the world of financial transactions. Its name "Bitcoin" is the contraction of the English words "bit", which corresponds to a unit of measure binary, and "coin" which means "coin".

Bitcoin, the most widespread cryptocurrency

The issue of Bitcoin is limited to 21 million units, each divisible up to the eighth decimal place. With a capital of around 200 billion euros, it is today the most important cryptographic currency on the market and has been recognized since 2012 by the European Central Bank as the most widespread and successful virtual money scheme.

How does Bitcoin work?

This cryptocurrency relies on a peer-to-peer virtual payment system. Each transaction is stored in a secure public register, the "blockchain", and requires no intermediary: it is therefore a decentralized operation, based on a system of nodes. Each new block added to the chain must be verified, secured and registered: this is called "mining". Users who perform these checks, minors, are then paid for each new block registered.

Bitcoin is a virtual currency that has no real representation. That is, you can not have bitcoins on you withdrawing from a distributor. These bitcoins are only found on the Internet and, like gold at one time, serve as currency in different transactions. It is expected that 21 million bitcoins will be available when the deployment of the currency is completed, ie in 2140. However, no entity or state will be able to create its own bitcoins.

How do transactions work?

Before you know how to use bitcoins, you have to understand what public keys and private keys are. Each user has one of each. The private key is unique and only the owner knows it. It allows a user to encrypt the message that he sends during a transaction. To read this message, you need a public key. This means that only bitcoin owners can read messages that indicate transactions.

These messages appear in the blockchain, a kind of registry that indicates all transactions made with bitcoins. Before being registered, a transaction is verified by the blockchain. This makes the blockchain can not be falsified.

In addition, transactions are even more secure thanks to the numbering of bitcoins. Each bitcoin has a number that makes it unique. This means that a person can not sell the same bitcoin multiple times and can not sell a bitcoin that he does not own. These numbers are obviously displayed in the transactions that appear on the blockchain. All these measures make Bitcoin a totally secure and transparent means of payment.

How to use bitcoins?

So, if you want to sell bitcoins, you have to file an offer announcing the number of bitcoins and the price you want. If you find a buyer, you will send him a message that will be encrypted with your private key. Once the transaction is validated, it appears in the blockchain and all users can be informed of the transaction.

On the contrary, if you want to buy bitcoins, you have to respond to an offer that corresponds to the amount you want to invest. Once the transaction is complete, the seller sends you an encrypted message that you can read through your public key. After the acceptance of the transaction, the buyer receives his bitcoins while the money is sent to the seller. This operation is done automatically.

Finally, each transaction is verified by minors. These miners are rewarded by receiving the new bitcoins released.