Crypto.com App

- Buy BTC and 50+ cryptocurrencies
- Pay by bank transfer, credit or debit card
- Spend anytime with the Crypto.com Visa card
- Take advantage of a wide range of extra features
Bitcoin is a digital asset that only exists online. It’s often described as being like an electronic combination of cash and gold. Bitcoin is meant to be spendable like cash, but also able to hold a lot of value similar to gold. However, unlike cash or gold, Bitcoin is entirely digital. With the digital currency setting new records in 2020, there has never been a better time to learn more.
Bitcoin refers to two things at the same time.
The Bitcoin digital asset is very simple. Bitcoin is just a digital coin, often abbreviated to BTC. It’s like any other coin except it’s purely digital. These coins are gradually created over time, up to a maximum of 21 million.
Each of these coins can be collected, traded and spent like money. The amount of new coins created will slow down over time and it will eventually take decades to produce just a few coins at the end.
When someone talks about buying, selling or trading Bitcoin, they’re talking about these coins.
Everything else that makes Bitcoin special is down to the Bitcoin network.
The Bitcoin network has two main jobs:
What makes the Bitcoin network special is that no one’s in charge of it and no one can control it.
No one can stop it from carrying transactions or creating more Bitcoin and no one can stop it from meticulously recording all Bitcoin transactions in its digital ledger.
Bitcoin was invented by someone, or a group of people, called Satoshi Nakamoto.
No one knows who Satoshi Nakamoto really is.
Bitcoin prices are influenced by supply and demand. A Bitcoin is only worth as much as someone is willing to pay for it.
There are three main reasons why people buy Bitcoin.
The theory is that by holding some money as Bitcoin, they can still have money even if their government collapses. Consequently, Bitcoin has become more popular in countries suffering from political instability than it has in more-stable regions.
Some investors also believe it’s a worthwhile addition to their portfolios in small amounts, because other markets, such as the stock market, forex markets and commodities are all closely interconnected, and at risk of falling all at once.
However, the Bitcoin network is perceived as being separate to other markets.
As the Bitcoin blockchain grew, an entire industry grew alongside it, including plenty of Bitcoin brokers and marketplaces.
You can find and compare some of them here.
The Bitcoin network was the first ever example of a blockchain as we know it today. It’s called blockchain because it can be pictured exactly like a series of blocks that have been chained together.
The Bitcoin transactions are contained in the blocks themselves and because they’re chained together the blocks can be easily processed in an organized fashion. This makes it easier for the Bitcoin network to keep a complete record of all the transactions.
In the case of the Bitcoin blockchain, a new block is created every 10 minutes on average. Whenever one arrives, the Bitcoin network automatically looks at all the transactions it contains, sends those payments to the correct recipients and records all the details of those transactions in its ledger.
The most up-to-date version of the ledger itself is transmitted on the blockchain along with the transactions.
In the end, you can think of the Bitcoin network as a kind of payments robot. If you want to send money to someone anywhere in the world, you can use the Bitcoin network to send them Bitcoin instead of going to the bank.
Because the Bitcoin network is a robot:
This system is what gives Bitcoin its value. Because it’s fully automated and keeps impeccable records, it’s also impossible to counterfeit Bitcoin and you can be 100% sure there will only ever be 21 million.
Back to topYou can explore the Bitcoin blockchain and go through its records from your computer, using programs called block explorers.
This is what blocks look like when you use this block explorer. You can follow along with it to see how easy it is to go through the Bitcoin network’s ledger.
If you look at a block explorer like BlockCypher, you’ll see some recent blocks. You can also see how many transactions were packed into each, how much Bitcoin in total travelled on those blocks and other things.
The height shows what number block it is. In the above picture, you can see there have been more than 50,000 Bitcoin blocks so far.
You can click on the block number to see the transactions on it. Here’s one of the transactions on one of those blocks:
As you can see, this person sent almost four Bitcoin to two different people in this block. Among other things, we can then follow either the sender or the recipients. If we follow the sender, we can see their Bitcoin wallet and how much money they have in it.
These are the kinds of details the Bitcoin network automatically records in its ledger. In this way, you can find every Bitcoin transaction that’s ever happened.
A more detailed guide to blockchain
Back to topThere are many different makes and models of Bitcoin mining machines,
but this is what most of them look like. Wikimedia Commons
Everything up to this point is purely digital. It’s all just lines of code and anyone who wants to see exactly how Bitcoin is programmed can do so easily.
But of course, the Bitcoin network still needs to come back to the real world at some point. It needs electricity to keep going and it needs to be tough enough to resist hackers.
This is where Bitcoin mining comes in.
Bitcoin mining is the act of searching for new blocks on the blockchain. This is done by solving a complex math problem. Whoever finds the answer first gets to add the next block to the blockchain and is awarded some newly created Bitcoin at the same time. This is where new Bitcoin comes from.
Ingeniously, the Bitcoin network will automatically adapt to the amount of energy that goes into solving those math problems, to make sure it always takes an average of 10 minutes to find each new block, no matter how much energy is put into it.
When there’s more energy committed to solving those problems, it makes them more difficult. When there’s less, it makes them easier.
Theoretically, any kind of computer can solve these maths problems and you could even do it with a pen and paper if you really wanted. But it’s a race to win the new Bitcoin, so miners try to be as fast as possible. To this end, they now use specialized Bitcoin mining machines designed to solve the problems as quickly as possible.
There are now entire mining farms filled with these kinds of machines, solving math problems for the Bitcoin network. All together, the Bitcoin network is now consuming more energy than some countries.
A tiny portion of this energy is used to actually pack blocks and send transactions around the Bitcoin network, while the vast majority of it is simply there to make sure the math problems behind each new block are extremely difficult.
This is important, because the more difficult those math problems are, the tougher it is to interfere with the Bitcoin network.
Learn about and compare mining options More on mining: What if the math problems are too easy?
Bitcoin itself will always be on the blockchain and nowhere else.
So when you own Bitcoin, you’re actually taking possession of what’s called a “private key.” These keys are used to unlock the section of the Bitcoin ledger where your coins are held, letting you move them around.
By itself, the private key looks like a complicated password, made up of a long string of numbers and letters.
These keys are stored in specially-designed digital wallets.
Learn about wallets and keeping your Bitcoin secure
Your comprehensive guide to the best bitcoin wallets, how they work and how to securely store your bitcoin.
Your guide to the factors affecting bitcoin’s value and what to look for when forecasting bitcoin price changes in the weeks and months ahead.
We analyze crypto transactions through exchanges on CoinMarketCap for the week of January 10, 2018.
We’ve rounded up the statistics on Bitcoin, the first and largest cryptocurrency.
Discover blockchain: what it is, how it works and who is exploring it in Canada.
Want to buy Bitcoin but don’t know where to start? This comprehensive guide provides step-by-step instructions on how and where to buy BTC in Canada.