I think that everyone has heard of Bitcoin before. I mean, last year, it has gained so much value and attention like never before. Cryptocurrencies have developed so much recognition over the last decade that it is difficult to ignore them. But especially for beginners in the Crypto Game, it might be hard to understand how the whole thing works. So stick around because I will tell you everything you have to know about the entire BTC thing.
Crypto Wallet?
Maybe you have heard of words like Blockchain or Crypto Wallet before and, perhaps these words are a bit scary for you (there were for me too). But don't despair because it isn't that hard to understand.
First of all, Bitcoin is not a currency like EUR or USD because you can't print them on paper (they don't even exist anywhere, not digital or genuine). Nonetheless, you can still buy things with BTC, trade them or keep it. BTC hasn't a fixed value like USD because the worth is based on supply and demand. At the moment (March 2021), one Bitcoin is worth nearly 60,000$! That is quite much. Therefore BTC is rounded on eight decimal places. So if you want to buy 10 dollars in Bitcoin, you have to pay 0,00017 BTC. To hold these Bitcoin, you need a Crypto Wallet. It is a digital wallet on your phone, tablet, or computer. You can use your Bitcoin address (34 characters) or a QR-code to receive BTC. The other way around, you can send BTC to a different address.
Blockchain & transactions?
Now you know how to send, receive and hold your BTC but not how the whole payment process works. Bitcoin is a decentralized network, so you can't trace back where the payment came from. That makes it safe and anonymous however it also attracts criminals and scammers.
When you are sending some BTC to another Bitcoin address, the transaction has three information:
- Input: The address which sent you the BTC.
- Amount: The amount of Bitcoin you are sending.
- Output: The address you are sending the BTC.
Now you need a private key for your transaction. This private key is, well, private and randomly generated (most of the time, you don't even know the private key yourself). Imagine your wallet address is a bank safe out of glass, and everyone can see inside, but you need the private key to open it. After you send the BTC, they get transferred to the Bitcoin Network. Not they get validated so that you didn't fake the transaction. Afterward, the transaction gets written onto a block. This block contains one megabyte of transaction data. After the block is full of data, it will get linked with the next block. This whole chain gets called Blockchain.
You can see all transactions of the Bitcoin Blockchain here:
Bitcoin Blockchain
Mining?
The last topic for today will be Bitcoin mining. With Bitcoin mining, you can earn some Bitcoin by helping to secure the network. You provide computing power and try to solve a block. It is a bit complicated, but basically, your computer or ASIC (special mining hardware) tries to solve a difficult mathematical problem. The better your hardware is, the harder the problem gets. If you solve a Block, you get 6.25 BTC. That is a lot! But keep in mind that millions of miners are trying to solve the Block too, and you have to be the first miner who solves the Block. Therefore lots of miners are joining a mining pool. It is a place where you combine all computing power. If the mining pool solves a Block, all pool members get a split reward of 6.25 BTC. That is usually more profitable than mining alone.
Next time
Wow, thanks for reading my whole first blog. I hope you have learned something fascinating. Next time we will talk about Bitcoin trading and Crypto Tokens. Till then, have a safe time!
If you liked this blog, I would be happy about every support!
