Bitcoin is a very curious technological idea. By combining computer networks, cryptography and software it is possible to create a fully distributed virtual currency, without the need for a central entity to issue and control it. Eight years later, cryptography remains strong and the use of Bitcoin has skyrocketed.
The economy behind this currency is the same as the one behind any one: scarcity and confidence. That is, there is a solid basis for a Bitcoin to cost money, at least as solid as the one that sets the prices of gold.
And although Bitcoin was the first cryptocurrency there are many others. It is true, Bitcoin is still the most popular but lately others like Ethereum are increasing in value for other value added services they offer.
BITCOIN, HOW TO GET THEM
It is clear that if we want to obtain euros it is enough to work in a country whose currency is euros or go to a currency exchange office. But how do we manage to have Bitcoin? Of course not working, since it is not an official currency in any country in the world.
The beginnings of any currency are complicated. There has to be an issuing bank, people have to trust and accept the currency and little by little it is put into circulation. On the other hand, with Bitcoin there is no issuer, the distributed computers that ensure that the transactions are correct obtain, from time to time, coins as a reward. This is called mining, and it is the way in which money is created with Bitcoin.
But before putting our computer to work to create money, I have to say that mining is crazy right now. Those who make money with this technique have clusters of computers with dedicated graphics cards and in areas where electricity is cheap or even subsidized. Making money from mining is a thing of the past.
So? Where did we get Bitcoin? Well, like in the real world, in currency exchange houses. On the Internet there are many and allow us to change normal money (euros, for example) by Bitcoins. Coinbase is a site of change (and purse, as we will see later) quite popular.
BITCOIN, HOW TO SAVE THEM
Now we come to the big question: how and where are the Bitcoins saved? Well, cryptocurrencies like Bitcoin are completely virtual. To access them originally you had to use software. This software allows us to see the balance that we have in our account and make and receive transfers.
The good thing about Bitcoin is that it is an open protocol, there are many software to manage our money. There is for Windows, Linux, Mac, Android, iOS ... I personally recommend taking it on the mobile and Android I like Android Wallet.
However, using a software has a danger. If for some reason the device is damaged or is 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 the software saves is a copy of the key to access it. If we use software it is convenient to make a backup copy of these keys.
Another option to take control of our Bitcoin is to use a web wallet. In this way a web page is responsible for saving our passwords and we will access our accounts with a username and password. Basically what these websites do is the function of a bank.
Coinbase is a good option for this, which also allows you to buy and sell Bitcoins. The only bad thing 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. Nobody can seize our money without stealing the keys. On the other hand, if we have money on a website, we have to trust it.
BITCOIN, QUOTES SWINGS
Now it may seem that the Bitcoin is very expensive, more than 2000 euros to change. And that is not a good time to invest in it. But in the past we have already seen similar moments, and the advice should be the same: be careful because it is a very speculative good.
Bitcoin has suffered many bumps along the way. The first was the closure of Silk Road, a market for illegal exchanges that the FBI closed in 2013. Transactions were made with Bitcoins and the price fell.
Just a year after the biggest Bitcoin exchange in the world, MTGox, suffered an attack and stole 744,000 Bitcoins from its users. Soon he had to close. Again the price fell.
But Bitcoin was not a passing fad. And although he still has many challenges ahead, he has managed to overcome each setback. So you have to take it into account in the future, either as a plus asset or as a currency to pay.