What is bitcoin used for? Everything you need to know about the first cryptocurrency

Bitcoin is considered the first crypto-currency in history.

It all began in October 2008, a few weeks after the collapse of Lehman Brothers, one of the biggest US banks. A mysterious document was uploaded to the internet: "Bitcoin: a peer-to-peer electronic payment system." Its author, Satoshi Nakamoto, proposed a way of creating a system for a decentralised currency. Bitcoin is a project based on transparency, security and disintermediation.

To better understand what Bitcoin is proposing, let's take a look back at the traditional banking system. Today, most money is already "digital". Banks essentially manage their own ledgers of transactions. However, the banks' books are not transparent and are stored on each bank's main computer. In other words, it is impossible to be able to watch what the banks are doing with the money they are "securing".

Bitcoin is a transparent ledger. Anyone can, at any time, take a look at what is happening on the Bitcoin blockchain. This "ledger" is accessible at all times, as long as the Internet is functioning, and it is then possible to see all the transactions and therefore the overall balance. Nevertheless, Bitcoin ensures pseudo-anonymity for its users, since no one is supposed to know the identity of the person executing a transaction on the network.‍

Functioning‍

Bitcoin is a digital currency, entirely dematerialised. There are no gold or silver coins or banknotes whose value depends on the number written on them. We are talking about a single currency built on the blockchain. For information, Bitcoin production is limited to 21 million and each Bitcoin is made up of 100 million Satoshis, meaning that the smallest value that can be bought is one hundred millionth of a Bitcoin.

Bitcoin is the Internet of money. It uses blockchain technology to ensure transactions and enables the establishment of a peer-to-peer service on the Internet. Bitcoin allows you to carry out financial transactions without revealing your personal information. Your name or bank card number is never revealed, because Bitcoin does not need them. The blockchain recognises you as the owner of a Bitcoin address, allowing you to send and receive funds without external trusted third parties. The blockchain, by its nature, operates as a trusted third party.

The value of Bitcoin increases if buyer 2 pays more for his Bitcoin than buyer 1. The opposite works when the price falls. The supply of Bitcoin is limited; there will never be more than 21 million Bitcoins in circulation, which represents a much larger reserve of digital currency than any other nation in the world today. Because of its digital nature, Bitcoin holders can use its network from anywhere in the world. Only an internet connection is required in order to carry out the exchange.‍

Advantages‍

Bitcoin is a digital currency that offers several advantages over traditional currencies:

👉 Decentralisation: no government or bank can control Bitcoin.

👉 Transparency: transactions are open and transparent.

👉 Traceability: all transactions are recorded on the blockchain, making it possible to trace the history of transactions.

👉 Freedom: Bitcoin allows you to carry out financial transactions without revealing your personal information.
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Disadvantages‍

Despite its advantages, Bitcoin also has some disadvantages:

👉 Instability: the Bitcoin price is highly volatile, which can make it unpredictable to use.

👉 Security: although the Bitcoin blockchain is considered to be very secure, Bitcoin exchange platforms can be vulnerable to hacking.

👉 Energy consumption: mining Bitcoin consumes a significant amount of energy.

In summary, Bitcoin is a digital currency that offers several advantages over traditional currencies in terms of decentralisation, transparency, traceability and freedom. However, it also has some disadvantages in terms of instability, security and energy consumption.