Do you know what a Bitcoin is?
According to Idealista, it’s on everyone’s lips. In just five years a bitcoin has gone from being worth almost nothing to border the 10,000 euros and become a standard payment method in cyberspace. Although the general public remains outside this cryptocurrency market, its success and consolidation arouses more interest with the entry of exchange platforms, banks and regulators. Here we explain what they are and how they work.
The technology behind bitcoin was born in a mysterious way in 2007 from the hand of Satoshi Nakamoto, a name that is not yet clear who is hiding. The idea, embodied in a ‘white paper’ was to create a system of electronic cash exchange P2P (peer-to-peer), which will not pass through traditional financial institutions. Basically Nakamoto wanted to take the logic behind P2P services like Napster or the Torrents to financial transactions.
What is a bitcoin?
A bitcoin is nothing more than a string of characters that is linked in a moment to a wallet. A user creates a ‘bitcoin wallet’, a public address, but anonymous, in which cryptocurrencies will be stored, similar to the operation of an email address. That address can be shared to receive payments. This is an example: ‘3FkenCiXpSLqD8L79intRNXUgjRoH9sjXa’.
Any transaction between wallets is recorded in the blockchain, the spinal cord of the cryptocurrencies. The blockchain records all the transactions of this virtual currency that have been completed since its birth, so that the system knows what the balance of each portfolio is. The maintenance of this extensive distributed and non-centralized database requires strong computing power.
Blockchain is a distributed information system that allows you to record and verify the authenticity of all transactions and balances of bitcoin. Each transaction is spread throughout the network of miners to register and subsequently be verifiable. This mining allows confirming that the cryptographic transactions have taken place and that they are unique and unchangeable a posteriori. Mining requires a high level of processing, so those teams that participate receive an incentive in the form of bitcoins to solve the logical problems that are presented.
Being a distributed system, without a central node, the transactions can not be altered or falsified, since other users of the network have registration of the transaction and can confirm the authenticity. The network has records of all transactions made with bitcoin and thus knows the balance of each portfolio. Someone who wanted to steal bitcoins should fake the whole chain of transactions with bitcoin, a herculean task, almost impossible.
Like portfolios, bitcoin transactions are anonymous, since the identities of the exchange actors are encoded.
What is it for?
Due to its anonymous nature, bitcoins can be used as cash on the internet. At first they became popular in the so-called «Dark Web«, to make sales of drugs, weapons, stolen data and other illegal material exchanges. However, the greater stability of the system, the entry of new players and the improvement of so-called «exchanges» has allowed the cryptocurrency to become more popular.
Banks like Goldman Sachs or Citigroup have accepted that in the future cryptocurrencies will be an important element of the financial sector, even though countries like China have tried to contain speculative operations and the diversion of capital through cryptocurrencies. The European Union, for its part, is taking measures so that the ‘wallets’ are not anonymous and are linked to someone.
Is it safe?
The legitimacy of bitcoin has reached such a point that the CME group wants to create futures linked to the value of cryptocurrencies and that they start trading at the beginning of next year. Those who believe that the world is overreacting to the arrival of bitcoins argue that in reality the real progress offered by bitcoins is the blockchain, a new large database replicable, incorruptible and verifiable. Other cryptocurrencies such as Ethereum try to gain position in this area, as a means to become a large universal computer, as well as cryptocurrency.
In addition to serving to make any type of online purchase or as an investment asset, bitcoins are increasingly being used for the purchase and sale of housing and other transactions in the real economy. Predictably, with the stabilization of the value of bitcoin in the future, those who began to accumulate bitcoins during the first years of life of the cryptocurrency will invest their profits in the real economy, among them real estate assets.