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Bitcoin: how the controversial virtual currency works

Great potential or just a passenger fuss? Here's what bitcoins are, how they work, and what are the benefits of using this electronic currency.

Value subject to strong variations but without the risk of devaluation: the bitcoin more and more followed, discussed and studied. What are bitcoins, how this special coin works, and why it is so debated.

bitcoin how it works

One hears more and more often about bitcoins, a strange currency of which very little is often known, but which continues to attract the worldwide attention of banks and investors thanks to its trend and growth.

But what are they really?

What bitcoin is

The term bitcoin is the result of the fusion of two English words: bit, with reference to the computer science, e coin, or coin.When we talk about bitcoin we refer to one virtual and digital currency: the most attentive and specialized in the field will object that it is not a question of money, but of currency, but is indicated as currency to allow easier understanding.

Not comparable to any other currency of those used but, who owns bitcoins, possesses money, has purchasing power, and therefore has the possibility of buying material goods or making investments. In the specific jargon, it is a virtual currency, since there are no paper or metal coinswho represent them physically.

An electronic currency, therefore, that does not exist physically because it is not in a specific real space, but in a place that we all know very well: the internet.

How bitcoins work

Bitcoins were invented in 2008 and released for the first time on the internet in 2009, by an anonymous programmer known under the pseudonym of Satoshi Nakamoto, whose identity is not yet known but whose nickname probably conceals a team of developers who designed and built the system. Let's talk about filesgenerated by software open source untouched to date, based on an articulated apparatus of encrypted algorithms that require considerable computing power, and for this reason not within everyone's reach.This system in practice really complex and cumbersome follows the laws of Peer to peer: not only the direct connection between two networked computers is possible direct transfer of bitcoins from one user to another, but also the recording of all transactions that took place with this currency.

Moving from one owner to another, however, made secure by character encrypted of the system: each owner gets two types of money transfer codes; a public one that is used to receive payments in bitcoins, and a private one that allows the authentication of the transactions. The first one can be considered as a sort of IBAN code provided by the traditional banks for the current accounts, therefore, while the second one as the signature of the holder which authorizes the transfer of money.

What is the value of a bitcoin?

Bitcoin does not have an absolute value, and does not depend on the issuance of one central bank as with traditional coins.

So how much is the value of bitcoin?

There is no real value, rather the experts talk about value in the currencies we all know: a rather variable value, e depends on the market only of demand and supply, as for example occurs for precious materials such as gold and diamonds. Consequently, as happened in recent years, the greater the public interest in this currency, the greater its value.

You can get an idea of ??the current value by browsing the coinmarketcap.com website, which contains updated information on bitcoins and other useful information for those who are thinking of investing in this new economic reality.

Bitcoin wallets

Being virtual currency, are there places to store bitcoins?

S, and they are called portfolios: they are the so-called wallets, or virtual purses that contain bitcoins within them. They are special software that have the purpose of physically guarding the files, and it is necessary to possess one both to send and to receive payments in the electronic money of Nakamoto.

Wallets can be divided into:

  • Computer programs;
  • Smartphone apps;
  • Web sites;
  • USB flash drive.

therefore it is possible to keep the bitcoins on your PC, taking care not to contract virus infections or to damage the computer hardware, otherwise you will lose all your luck. The same goes for the smartphone, while it is possible to cram the virtual currency into special online platforms, which take care of storing virtual money as real banks. Finally, it is possible to keep them in a physical key, to be kept safe so as not to lose electronic capital.

How to get bitcoins

To get hold of the bitcoins, there are two modes:

  1. To buy;
  2. Undermine.

In the first case it is possible to buy, according to the current value in euro or dollar, from someone who already owns this coin: according to the law of the market, it is more advantageous to buy them when their value is lower. If, on the other hand, you do not want to buy bitcoins by spending money , it is possible to undermine them: with the term mining means the process of bitcoin extraction by the software that generates them.This process, however, requires advanced and often expensive hardware resources, as well as a substantial amount of time dedicated to mining work, which consists of decoding the encrypted process, and verifying the transactions that took place online.

In fact, the bitcoin system considered safe because all movements are recorded from a database that keeps track of it since generation, to avoid that they can be replicated or spent again. This huge register, called blockchain, is stored on the computers of all the users involved.

The advantages

Supporters of this electronic currency identify various benefits deriving from the use of the same, such as:

  • Practical use;
  • traceability;
  • gratuit;
  • timeliness;
  • Safety;
  • Anonymity;
  • No devaluation.

Specifically, the comfortable bitcoin system for send or receive payments worldwide, only through the use of an internet network, but also fast since the operations take place in real time and, above all, they are free. Every movement is recorded by the blockchain, and therefore it is possible to go back to all the movements of money, which take place in total safety and without the need to provide one's identity to the other party. Furthermore, since they are not subject to inflation or deflation, bitcoins do not undergo devaluations but, according to the experts, their value will always grow even after reaching the maximum limit, equal to 21 million.

Between anarchy and organized crime

If many of these aspects can be considered advantages, there are many who argue that this is a double-edged sword. In particular, it is assumed that the conception of bitcoin has a political purpose, or that of removing power from banks and states , and of let the current financial system go haywire. Furthermore, there are those who see in the anonymity of transactions the risk of having criminals on the other side of the screen, since we often talk about bitcoins in relation to requests for ransoms or illicit money.