What is bitcoin, how is it produced, where and how to buy bitcoin, is it anonymous? Questions and answers about bitcoin (BTC).
"A peer to peer electronic cash system."
What is Bitcoin?
Bitcoin (BTC) is a digital currency that is not managed by any authority, is based on blockchain technology and works differently from traditional currencies. Bitcoin is referred to as a “cryptocurrency” because it is cryptographically secured.
Announced with a white paper named “Bitcoin: Peer-to-Peer Electronic Cash System” published on October 31, 2008, bitcoin was born with the principle of eliminating the need to trust third party payment systems, banks and brokerage houses. Nowadays, the role of financial intermediaries in providing trust has not ceased to be necessary because the two parties have a direct connection with each other thanks to the technology underlying bitcoin. It is not known who the author of the Bitcoin white paper document, nicknamed Satoshi Nakamoto.
Why is the nature of Bitcoin Unique?
One of the most important features about bitcoin is decentralization. No authority, central bank, president, company or organization controls the bitcoin network. In today’s traditional financial system, the whole system is based on a central view. However, there is only one group of volunteer code writers behind bitcoin. All transactions and transfers take place without intermediaries between people.
Limited supply is one of the factors that make bitcoin special. The main actors of the traditional financial system are the fiat currencies can be printed unlimited. However, the maximum amount that bitcoin can reach is limited to 21 million. One of the most basic expressions of finance theories says that the price will always increase if supply remains constant while demand rises. The demand for bitcoin has increased steadily since 2008, and the limited supply confirms these basic discourses.
Is Bitcoin Anonymous?
It would not be correct to say that Bitcoin is completely anonymous. It can be called semi-anonymous instead. In the traditional financial system, users have to declare their identities. It is not possible to transfer money anonymously over the banks. However, Bitcoin users do not have to provide their names as they can send money directly to each other without being connected to a central authority.
The only information users declare on behalf of identity in this process is their unique wallet codes. One of the parties can provide direct shipping to the other party using this wallet code. However, it is important to note that these wallets can be easily tracked. Using Bitcoin will not give you the right to penetrate any law, and if you attempt such an attempt, you can easily get on the radar of the security forces.
How and Where to Buy Bitcoin?
The way to buy bitcoin with your fiat assets is crypto exchanges. Today, most exchanges comply with KYC (Know Your Costumer) and AML (Anti-Money Laundering) principles. Users must declare their credentials while registering on crypto exchanges. Some exchanges allow users to make Bitcoin transactions without exceeding certain limits without declaring their identity information.
It is extremely easy to buy bitcoins on crypto exchanges. Thanks to the agreements of exchanges with banks and payment companies, you can convert fiat coins to bitcoin in various ways and easily.
How is Bitcoin Produced?
The process of generating bitcoin is called “mining”. The production of a non-physical asset through mining is of course an imaginary discourse. The reason is that it is similar to gold mining in the digital sense. With a limited supply, just like gold, 21 million of Bitcoin will be in circulation one day.
The people producing bitcoin are called “miners”. At the core of mining is the task of computers with powerful processors to approve financial transactions on the bitcoin market. The bitcoin network rewards the miner who produces the fastest blocks and approves transactions. In short, miners solve a complex puzzle and get rewards in return. Today, good equipment is needed to make Bitcoin mining profitable. There are large companies that develop equipment for mining only. Since the profitability of mining changes from day to day, the amortization of the investment can take different periods.
There is another option called cloud mining. Miners who want to avoid hardware cost can rent online device power by registering to cloud-based network servers.