What is Bitcoin? How to Use it? How Does it Work?

Many Internet users ask this question: What is bitcoin? In short, it is decentralized (which means bitcoin can not be faked or banned) an electronic currency, completely protected from deterioration and issuance. In the first 2 years of its existence, the idea did not leave the borders of the World Wide Web itself: the population simply did not know about the currency or did not understand what bitcoin is. But in a number of countries in South America and Japan, it has already been recognized as a payment instrument – bitcoin can be used on a par with the official currency.

What is Bitcoin? A Simple Explanation

The first thing you need to know: It’s a virtual currency and it functions both on computers and on mobile devices. Bitcoin does not have a central administrator and any control from the people, which turns out to be significant benefits for users. The creation of a bitcoin was started in 2008 by a programmer under the pseudonym of Satoshi Nakamoto. The new currency bitcoin came to the world fame after 2 years, demonstrating a steady growth trend. The name of the creator gave the name of the smallest particle of bitcoin (it is a one hundred millionth of a single bitcoin) – Satoshi.

How Does Bitcoin Work?

So, how is bitcoin constructed? To understand the principle of the operation of a cryptocurrency, it is best to compare it with an online bank, a payment system or a real bank. Translation in traditional payment systems looks like this:

  1. You send the bank a request “I want to send 50 dollars from the account A to account B”.
  2. The bank or the server decides whether it is possible to make a payment, and also charges a commission.
  3. Money comes from your account to the one you specify.

This results in a large number of inconveniences to the user: a server malfunction, problems with the law of the bank or any other issues make payments both inaccessible and, possibly, withdrawing money from the account. And now let’s see what bitcoin is, how the system works.

Bitcoin uses a special algorithm (blockchain), which is evenly used in the operations of every computer running on the system. At the same time, the devices themselves are not connected with each other geographically and can be located in different parts of the globe. To store information about current tools, each device is also used, all is repeatedly encrypted and duplicated.

Algorithm of Payment in Bitcoin

  1. You create a request “I want to send 50 dollars from the account A to account B”.
  2. The algorithm decides which computer will process your transaction.
  3. There is an “inscription” of information and transfer to all devices in the system.
  4. And bitcoins arrive at the B account.

How to Buy Bitcoin?

There are several ways to get bitcoin:

On stock exchanges. At the moment there are many really working and usable options:

  • Coinbase
  • Localbitcoins
  • BitQuick
  • Bitbargain

The main part of the market (about 70%) is held by the BTC-USD pair. For most of these services, authorization is required, including sending scanned documents for verification.

How to Use Bitcoin?

There are many options for both speculators and investors, and suitable for less risky users who do not know what bitcoins are and why they are needed:

1. Saving – All the trends indicate that the demand for bitcoin will grow very quickly and after 2 years it will oust international payments from the market.

2. To make international payments. In the environment of freelancers and remote employees, the payment by bitcoins has become commonplace – it is cheap, reliable and anonymous, as bitcoin was always known, the principle of which is based on decentralization and powerful encryption.

3. Buying services with Bitcoin

At the moment BTC can pay off with Dell, Microsoft and Amazon, not to mention hundreds of stores and smaller services. In the countries of the European Union, South and North America, and also in the Far East, they can easily pay for food, clothing and other small goods – bitcoins in the world are in great demand.

4. Play gambling, make sports bets, use for trading on exchanges, even if they simply do not exist in your country. Here everything is limited only by the imagination of developers of various projects and the possibilities of cryptocurrency. After all, what is bitcoin in simple words? The ability to spend money anonymously and quickly.