Understanding Bitcoin (BTC): Definition, Value, and Purchase

 

Bitcoin, the pioneer and most popular cryptocurrency, remains an innovation often misunderstood by the public at large. Where does this cryptocurrency originate? How does it function? How is Bitcoin mined? How is its value determined? This article is an insightful guide to this essential crypto asset.

What is Bitcoin?

Before delving deeper, it's crucial to distinguish between Bitcoin, a protocol akin to the internet, and bitcoin, the currency it generates. Bitcoin serves as a protocol, issuing the cryptocurrency. Commonly known as digital currency, it's exchanged peer-to-peer, typically recorded on a decentralized ledger, distributed across multiple servers—the blockchain.

Creator of Bitcoin

In 2008, Satoshi Nakamoto, a pseudonymous developer or group, invented Bitcoin. Despite countless investigations, their identity remains undisclosed. On October 31, 2008, the white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" emerged, initially circulated through Cryptography, a cryptography-focused email list.

Bitcoin functions as an internet protocol, facilitating value transfer without a trusted intermediary.

How Does Bitcoin Work?

Peer-to-Peer System

Bitcoin operates on a peer-to-peer data transmission protocol, relying on a decentralized governance structure—the blockchain, a registry comprising data blocks (transactions), issued approximately every ten minutes.

Mining and Blocks

These blocks, created by miners (originally standard computers, now equipped with specialized chips), are verified and validated by nodes, enhancing network integrity and decentralization. Each block holds a set volume of data, accommodating between 2,000 to 4,000 transactions.

Miners are remunerated for transaction execution by levying fees and receiving bitcoin rewards upon block completion.

Bitcoin Mining: The Process

Mining Allocation Mechanism

Bitcoins are mined during block creation. Miners engage in complex calculations to discover a block, with the first successful miner receiving a bitcoin allocation. Presently, this stands at 6.25 BTC per block, produced approximately every ten minutes.

Mining Pools and Halving

Given the immense competition, mining pools, collectives of miners, amalgamate computing power to heighten their success odds. The Bitcoin code halves the bitcoin emission roughly every four years—a process known as "halving." The upcoming halving in April 2024 will reduce the block reward to 3.125 BTC.

Understanding Bitcoin's Value Determination

Bitcoin's value hinges on supply-demand dynamics, devoid of central bank issuance or asset backing, relying instead on speculative mechanisms. This trust-based value concept is akin to many traditional currencies today.

Bitcoin's Volatility and Value Evolution

Bitcoin exhibits short-term volatility. As of December 7, 2023, its value surged over 150% in a year, exceeding 40,000 euros from 16,120 euros, following a 70% decline the preceding year. Over five years, Bitcoin's value surged by 1300% since 2018.

Tracking Bitcoin's Performance

Numerous platforms like Coingecko, Coinmarketcap, and specialized ones like Messari, Kaiko, or Tradingview offer Bitcoin price tracking. Additionally, cryptocurrency sale platforms provide comprehensive interfaces for monitoring bitcoin prices.

Purchasing Bitcoin in France

Over the past decade, buying bitcoin in France has become more accessible, owing to regulatory clarity and proactive local players.

Buying Bitcoin from Regulated Providers

Prestataires de services sur les actifs numériques (PSAN) accredited by the Autorité des marchés financiers (AMF) are recommended for purchasing bitcoins, ensuring compliance with French financial regulations.

Notable Bitcoin Sellers in France

Renowned sellers in France include Paymium, Bitstamp, Coinhouse, StackinSat, Bitstack, Binance, eToro, Trade Republic, Delubac, and Finary. Platforms like Coinbase and Kraken, though reputable, are not (yet) registered with the AMF.

Understanding Bitcoin Wallets

Types of Wallets

Bitcoin wallets come in various forms, differing in usage and security levels. "Hot wallets" are connected software wallets suitable for daily transactions, while "cold wallets" remain offline for heightened security.

Cold Wallets and Security

Cold wallets, like hardware wallets from Ledger or Trezor, offer enhanced security by keeping the private key offline. Brain wallets, memorized phrases deriving private keys, also exist, providing high security but carrying life risks.