DeutschBitcoin: for over a decade, the cryptocurrency has fascinated the world. As the first decentralized cryptocurrency, BTC also divides opinions. But what is Bitcoin all about and how does the network work? In this article, we have summarized the basics of BTC for you:
What is Bitcoin?
Bitcoin (BTC) is a decentralized virtual currency based on cryptographic processes. Therefore, Bitcoin is referred to as a cryptocurrency. The inventor of BTC is Satoshi Nakamoto. This is a pseudonym, and the developer of Bitcoin has not revealed his anonymity to this day. It is not even clear whether it is just one person or a collective.
The special thing is that there is no higher authority that decides on the cryptocurrency alone. It is a decentralized network that is maintained by numerous participants. Before we go into the functioning of the cryptocurrency in more detail below, we will use the whitepaper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” for a BTC definition. As an explanation for BTC, the following can be noted for the meaning:
Bitcoin is a digital currency with elements from cryptography that is intended to enable a direct and independent transfer of value between two parties.
Good to know: Even though there is always talk of one Bitcoin, a BTC is a divisible unit. Just as the euro consists of 100 cents, one Bitcoin consists of 100 million so-called Satoshis. A Satoshi expressed in decimal numbers is therefore 0.00000001 BTC.
How Does the Number one Cryptocurrency Work?
Bitcoin is a decentralized protocol that is supposed to be unforgeable. The Bitcoin blockchain, on which the transactions are carried out, is responsible for this. The BTC blockchain is public, so that all transactions can be viewed by any user at any time. Transactions are grouped into blocks and then checked and confirmed by miners. After that, the transaction is stored forever in the blockchain, visible to everyone and can no longer be manipulated. Here, a look at our blockchain article is particularly suitable, in which the functioning of a blockchain is explained in more detail.
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Bitcoin Mining Explained: how are New BTC Created?
Bitcoin mining is an important chapter. Miners are responsible for verifying and confirming transactions. The more miners participate in the network, the more secure the network is. Mining is therefore the process that maintains the Bitcoin network and also ensures that new coins are created.
This is how New BTC are Created
Bitcoin miners compete with each other to be the first to solve complex mathematical problems. To be the fastest, most BTC miners own and operate huge amounts of specialized computer hardware designed specifically for this purpose. Those who solve the mathematical problems the fastest earn the right to validate blocks of transactions and add new blocks to the Bitcoin blockchain. The miner sends the addition of the latest block to the network.
When Bitcoin came onto the market, it was possible to mine a coin almost immediately with a simple computer. Today, rooms full of powerful devices are required, often high-end graphics cards that can handle the calculations very well, which, in conjunction with the fluctuating Bitcoin price, sometimes makes mining more expensive than it actually is.
The miners also choose which transactions they combine into a block, so that the sender charges fees of varying amounts as an incentive. But what happens when there are no more Bitcoins to mine? Once all BTC have been mined, these fees will continue to be an incentive for further mining. This is necessary because it provides the infrastructure of the Bitcoin network.
Is Mining Really that Harmful to the Environment?
Opinions are very divided on this issue. Bitcoin mining does indeed require about as much electricity as the entire country of Argentina consumes per year (around 130 to 140 TW/h). However, it is also important to realize that this is a system that has set itself the goal of digitizing the complete transfer of value in a trustworthy manner, without, for example, the double-spending problem occurring. The question here, of course, is what is a trustworthy network worth to users?
In addition, Bitcoin’s energy consumption is transparent. This means that we can check how much electricity the network consumes. This is not so easy to do when considering the banking infrastructure.
The Bitcoin Halving: What is it?
In the following, we want to go into the halving process, called halving, in more detail. You will also find out when the next halving will take place.
Bitcoin Halving Explained
First of all, it is important to understand that the maximum number of Bitcoins is limited. The maximum amount is fixed at 21 million BTC. This means that there can never be more BTC. However, the BTC are not pre-produced, but are created in the mining process described above. At the beginning, the Bitcoin algorithm stipulated that miners would receive 50 Bitcoin per block as compensation for their work. Since the limit of 21 million would be reached quickly, Satoshi Nakamoto built in the halving process. After 210,000 blocks (approx. every four years), the reward is halved. This means that fewer and fewer new BTC are created over time. At the current time (March 2022), almost 19 million BTC have already been mined since 2009. The 21 million BTC will not be reached until 2140.
Since the release of Bitcoin, 3 halvings have already taken place. Therefore, miners now receive only 6.5 BTC per block as a reward. The halving is therefore responsible for why the digital currency could become increasingly valuable. BTC is not only covered, but also the new coins are created less and less frequently.
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When Will the Next Bitcoin Halving Take Place?
The next halving is expected to take place on March 2, 2024. Why is the halving so interesting? The fact that fewer BTC are distributed per block after the halving very often results in a price explosion due to the simple principle of supply and demand. At least that’s how it has always developed in the past.
All previous Bitcoin halvings at a glance:
| Date | Price at halving | Price 150 days later |
| November 28, 2012 | $12.35 | $127 |
| July 6, 2016 | $650.53 | $758.81 |
| May 11, 2020 | $8,821.42 | $10,943.00 |
| March 2, 2024 (expected) | ? | ? |
As you can see, the Bitcoin price has always risen sharply afterwards. However, it didn’t stop after 150 days. In the bull run after the first halving in 2012, Bitcoin initially reached a price of $1,000. After the halving in 2016, it went up to $20,000 by the end of December 2017, and after the halving in May 2020, the bull run really only started in December 2020 – about half a year later. That’s why we will keep a close eye on the next halving.
Buy Bitcoin: Trade the BTC Cryptocurrency
In conclusion, we would like to give you instructions on how to buy Bitcoin. For a long time, buying Bitcoin was often difficult and hardly manageable for laypeople. Fortunately, this has changed over time, as the entire ecosystem surrounding cryptocurrencies has grown rapidly. Today, investing in BTC is as easy as buying numerous other digital and physical goods on the Internet.
If you want to buy BTC, you can choose between crypto exchanges and brokers. While you trade directly with other users on a crypto exchange, your trading partner with a broker is always the broker himself, who finances himself via the so-called spread.
Especially beginners are often overwhelmed when buying Bitcoins on a crypto exchange that is equipped with numerous functions. Therefore, our recommendation is clearly to use a crypto broker like Naga to buy BTC. This way you can buy Bitcoin with PayPal and also use numerous other deposit methods. We particularly like about Naga that you can also invest in numerous other cryptocurrencies and at the same time add stocks, ETFs, commodities and Co. to your portfolio. You also pay no deposit fees.
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Conclusion: the most Important Features of Bitcoin
In summary, we can say that Bitcoin has influenced parts of the whole world. Even 14 years after its release, millions of people appreciate the features of Bitcoin. Therefore, we will now summarize the most important features of Bitcoin:
- Digital – Bitcoins do not exist as a physical currency, but only in the form of code. This is where this digital currency differs from so-called fiat money, such as the Swiss franc or the dollar.
- Peer to Peer – Neither banks nor other intermediaries are involved when transactions are carried out with Bitcoins. This means that only the respective owner has control and can send his Bitcoins directly to a recipient without detours.
- Decentralized – Bitcoin is neither controlled nor issued by a central organization (compared to, for example, the Swiss National Bank). Basically, the digital currency belongs to the people who use it, pay, trade or mine the cryptocurrency.
- Pseudonym – Bitcoin transactions are managed in a public ledger, also called a ledger. This is also called the blockchain. The sender and the recipient, on the other hand, are only represented as a sequence of numbers and letters. Therefore, it is possible to use Bitcoin anonymously.
- Cryptography – the protocol for Bitcoin is based on very strong cryptography, which ensures that only authorized persons can access it.
Even if the Bitcoin protocol changes slightly over the next few years, these features should and should remain unaffected.
