Although the history of Bitcoin is short (emerged in 2009), much has rained since its launch. Its creation has always been surrounded by a certain halo of mystery, because it is not known who created it. Satoshi Nakamoto is just a pseudonym used by the person or persons who gave birth to the project.
But still today, eight years after its creation, Bitcoin is not entirely mainstream. Many have been surprised that the creators of the ramsonware that affected Telefónica and other companies would like to collect in Bitcoin. Let's explain everything about this currency.
Bitcoin, technology and economy
Bitcoin is a very curious technological idea. Combining computer networks, cryptography and software it is possible to create a completely distributed virtual currency, without the need of a central entity that emits and controls it. Eight years later, cryptography remains resilient and the use of Bitcoin has been shot.
The economy behind this coin is the same as the one behind either: Scarcity and trust. That is to say, there is a solid foundation for a Bitcoin to cost money, at least as solid as the one that fixes gold prices.
And though Bitcoin was the first cryptocurrency, there are many others. True, Bitcoin remains the most popular although lately other cryptocurrencies such as Ethereum are increasing their value for other valued-added services that they offer.
Bitcoin, How to Get Them
It is clear that if we want to obtain euros, it is sufficient to work in a country whose currency is euros or simply go to a coin exhange office. But, how do we manage to have Bitcoin? Certainly not working, as it is not an office currency in any country of the world.
The begginings of any currency are complicated. There has to be an issuing bank, people have to trust and accept the currency and step by step it goes in circulation. Instead with Bitcoin there is no emitter, Distributed computers that make sure that transactions are correct get coins as a reward. This is called mining, and it is the way in which money is created with the Bitcoin.
But before we put our computer to work to make money I have to say that mining is crazy right now. Those who earn money with this technique have clusters of computers with dedicated graphics cards and in areas where electricity is cheap or even subsidized. Making money with mining is a thing of the past.
So where do we get Bitcoin? As in the real world, in the currency exchange houses. On the Internet there are many and allow us to change normal money (euros, for example) to Bitcoins. Coinbase is an Exchange site (and wallet, as we will see later) quite popular.
Bitcoin, How to Store Them
Now we come to the big question: how and where are the Bitcoin stored? Well, the Cryptocurrencies as Bitcoin are completely virtual. To access them originally you have to use a software. This software allows us to see the balance that we have in our account and to make and receive transfers.
The good thing about Bitcoin is that it is an open protocol, there are many softwares to manage our money. There is for Windows, Linux, Mac, Android, IOS ... I personally recommend keeping it on your cellphone and inside Android, personally I like Android Wallet.
However using a software has a downside. If for some reason the device is damaged or deleted or formatted, we will lose all the money. Let's say that with Bitcoin the money is in "the Bitcoin Cloud" (the so-called Blockchain) and what saves the software is a copy of the key to access it. If we use a software it is convenient to make a backup of these keys.
Another option to manage out Bitoin is to use Bitoin Wallet. This way a website will be in charge of saving our passwords and accesing our accounts with a user and password. Basically these websites have the function of a bank.
Coinbase is a good option for this, which also allows you to buy and sell Bitcoins. The only downside is that if we use this method we lose part of the grace of having Bitcoins, use a completely decentralized system without relying on trust in any entity. No one can requisition our money without stealing our keys. On the other hand if we have the money on a web we have to trust it.
Bitcoin, quote swings
Right now it may look like the price of Bitcoing is too expensive, more than 4000$ Exchange. And many might say its not a good time for investing in it. But in the past we’ve seen similar moments and the advice should be the same: Careful because it's a pretty speculative good.
Bitcoin has suffered many potholes along the way. The first was the closure of the Silk Road, a market for illegal exchanges that the FBI closed in 2013. The transactions were made with Bitcoins and the quotation collapsed.
Barely a year after the world's largest Bitcoin exchange, MTGox, suffered an attack and stole 744,000 Bitcoins from its users. He soon had to close. Again the quote went down.
But Bitcoin was not a fad. And although they still have many challenges ahead, it has managed to overcome every blow. So you have to keep that in mind in the future, either as an asset or as a currency to pay with.