Every day you hear more or read the word Bitcoin and don’t know what it is, what a kryptonet is, what it’s for, why it’s so popular, or you just have no idea how to use it. You’re not the first person to get it, and you won’t be the last.
For many, talking or learning about using Bitcoin is a headache, as they imagine it’s a complicated or unsafe system. Neither is true. On the contrary, even though it seems difficult, you have to learn a couple of things to start making transfers, and it’s usually a secure payment mechanism.
Before we explain in detail how Bitcoin works, we should first talk about its meaning, and basic concepts.
Bitcoin is what’s known as a digital currency and system. Its abbreviation is BTC, and it’s important to note that while the platform as such is written with a capital B, the word «bitcoin» all lower case refers to the units of this currency.
As a currency, bitcoin can be used for what any other currency works for, buying, selling, etc. But unlike traditional coins, it does not depend on a central bank or any government entity to back it up, much less issue it.
It works entirely under a digital platform created by Satoshi Nakamoto, and before you go to Google to find out who it is, we save you those minutes. Although there’s been a lot of speculation about his identity, and several people have claimed to be the creator of Bitcoin, no one knows for sure the real person behind this crypto currency.
That’s why, simply to talk about Satoshi Nakamoto, it’s like the pseudonym of a person or a group of people, who in October 2008 published a ‘white paper’, officially known as a whitepaper, on an electronic point-to-point cash system in an Internet forum, and months later, in January 2009, released the first software.
This is how Bitcoin does not belong to any government or country, and because its inventor is anonymous and established it as a free license system, it is also not owned by any private company or individual. How does it keep working? Well, the users themselves do it.
Unlike the dollar, the yen, the euro or any regional currency, Bitcoin does not physically exist. It is exclusively digital, and works through blockchain. Thanks to its efficient mechanism of verification or consensus among those involved in a transaction, it cannot be spent on more than one occasion.
Each bitcoin, total or portion, is unique. Each transaction goes to a public record in the blockchain, which functions as a digital accounting «book», where anyone can verify that the funds actually exist and whether they moved from one direction to another.
Users can manage their bitcoin in digital purses. These work by means of a public key (which would be the equivalent of a bank account number), and a private key (which would be the password).
Thanks to them, financial transfers can be made from anywhere in the world at any time. It is also possible to exchange it for a local currency, thanks to LocalBitcoins or other exchange houses that exist in many countries.
Best of all, users will not be limited by the control usually established by traditional banks, which sometimes freeze accounts, nor will they be affected by the excessive commissions they usually apply. Bitcoin, however, was created to charge little or no fees.
How it works
After you have been properly informed, the first thing to do is to select a wallet, also known as a purse, wallet or wallet, through which you will be able to manage your funds. It should be noted, however, that this is not where the money is stored.
The coins are registered in the blockchains. The wallets have the function of handling the public and private keys that serve to carry out transactions, either sending or receiving.
These wallets are divided into three categories. Hardware wallets, which store the private key in a separate system outside the Internet (such as Ledger or Trezor); software wallets, which can be installed on a computer or mobile device, where the password is stored and encrypted (such as Electrum, Bitpay, Green or Coinomi); and websites (such as Bitgo and Blockchain).
New users are advised to make use of software, which in addition to providing complete security, is usually free.
It is important to clarify that you can use different wallets, it is not a limitation. And also, that there are some that work in any operating system, being able to manage your bitcoins easily where you are.
It is always advisable to make a separation of the funds, according to the use, for example, to have in different parts those that are for daily expenses from those that are to save.
The next step is to configure the wallet. You have to take into account that security depends completely on the user, this includes the seeds (or backups) of recovery. If it falls into the wrong hands, they will be able to access your finances. Big deal, right?
That’s why many people choose a very traditional way to protect it: writing it down on a piece of paper, and keeping it in a private, safe place that cannot be affected by humidity.
Receiving and buying bitcoins
Receiving bitcoins is very easy, all you need is to share a public link that will broadcast the wallet. All you have to do is press the receive button and the other person will send the money to the address that was sent to him, which is unique and issues the wallet itself.
To buy the bitcoins, there is a range of options that can be obtained with a simple search on the Internet. If you do not have to buy 1 BTC, do not worry. The minimum amount is 0.00000001.
Purchases can be made through personal exchanges, exchange houses, brokerage houses, P2P exchange systems, and ATMs, among others.