Bitcoin is a decentralized open source cryptocurrency. Seems confused? Calm down, let's explain better what Bitcoin is, the secret behind the scenes and why more than 15,000 businesses in Brazil have joined the payment method making fortunes in their coffers.
Designed by Satoshi Nakamoto (alias of the creator or team of Bitcoin creators) the cryptocurrency works like virtual money. When you work, you receive money on banknotes that can be exchanged for products or services, in the same way Bitcoin is like a virtual banknote, made of codes and not of paper.
On its website, cryptocurrency is defined as follows:
“It is a digital technology that allows us to reproduce in electronic payments the efficiency of payments with paper bills. Bitcoin payments are fast, cheap and without intermediaries. In addition, they can be made for anyone, anywhere in the world, with no minimum or maximum value. ”
How Bitcoin works
Bitcoin is an online currency with P2P (peer to peer) payment traffic, meaning it does not need a central intermediary server. What is the advantage of this? Think of traditional financial transactions:
- Payment by boleto: You spend on transportation to the bank and in addition to the time spent on transportation, the recipient only receives the money a few days later.
- Card purchases: Fees at the time of purchase, or card maintenance fees.
- Transfers: Fees for transfers and waiting times when they are between different institutions.
- In the P2P system you do not have a financial institution, for example, mediating the purchase, so it is instantaneous and at a reduced cost.
Currently online transactions require mediation from financial institutions, with Bitcoin the process will be as simple when buying a product with a banknote in a physical store:
Imagine buying a shirt for R € 50.00 in a physical store: you hand over a ballot with that amount, withdraw your product without the need for a bank to mediate the purchase.
Likewise, it is the virtual transaction with cryptocurrency, that's why it has become popular, it is cheap and fast because it is P2P.
Bitcoin is a cryptocurrency, but what is it?
Just as a Real banknote has protection technologies, virtual money must also have it. Real's new banknotes have holographic stripes, high relief, fluorescent elements, security wire, watermark, puzzle, microprints and a hidden number; it’s a lot of technology to prevent counterfeiting isn’t it !?
Likewise, so that virtual money is not cloned, it is protected by a set of principles and techniques called cryptography.
Cryptography: it is a set of techniques that aim to encrypt information so that it can only be read by those who know the code, guaranteeing the security of the information.
To make a metaphor, it would be like sending a locked chest to a friend by means of a messenger: he will take the chest to the other person, but he cannot open it, only his friend who has the key will be able to see what is inside.
Why does Bitcoin use the P2P system?
A currency that does not have a mediating institution like governments or banks is completely free. As a result, a government cannot stimulate its inflation, for example, by "printing" more bills. For this reason, the market itself with its supply and demand law will dictate the dynamics of Bitcoin.
The lack of mediation on the part of a financial institution also reduces the values for transactions and speeds up the speed of the procedures.
In addition, the data related to the transactions are stored until they can be validated by the so-called miners and this process happens in a transparent way: the code is free, so it is possible for anyone to access the information to check its validity.
Why it's safe
Transaction records are public as we mentioned in the last topic and this is the advantage over the financial policy of paper money. Banks keep their records under fourteen keys, so all information about finances can be real or not.
This does not mean that the banks necessarily lie about their fortunes, but who can take the proof of it if not themselves?
Cryptocurrencies follow another protocol in their transactions. Since the code is open, anyone can check information like:
User1 transferred 200 bitcoins to user 3
User1 has -200 bitcoins
User3 has +200 bitcoins
It is not possible to know who User 1 or 3 is, as this information is confidential, but there is complete transparency about the veracity of the transactions.
Another security is in encryption. The generated codes are easy to read for those who have the key, but difficult to read for someone trying to intercept the currency. This means that it is difficult to counterfeit money.
But just as in the case of a bank, you must be careful! In the same way that you keep your card password safe and secret, you must keep your private key - key that is able to access the user's wallet information safe and secret.
There is also the “wallet” that consists of a printed form of Bitcoin functioning as a banknote of any currency. However, its main function is to contain public and private keys offline, that is, outside the network. This way the chance of having the data stolen is further reduced, but it is necessary to keep the Bitcoin wallet well, because with it a person can access their data.
What are Bitcoin miners and what do they earn?
Miners are computers available to “mine” data and validate transactions. However, it is not a central server that does this, but us. Anyone can mine, you just need to have a powerful computer capable of processing information and keeping it running.
With that, with each validation you get a tiny bit of Bitcoin from that transaction as payment for the service, the more powerful your computer, the more of these transactions it will do and the more you can profit.
But you have to do the math ! If your machine (s) is not good enough, you may end up spending more on Internet and energy than you would be able to profit.
Is Bitcoin important to my company?
With that, Bitcoin was one of the best investments of the year 2015 and 2016 was no different. Last year, bitcoin appreciated almost 50% against the Real according to Economatica.
Cryptocurrency, therefore, already has a significant market weight and is far from being a futuristic fiction, it is a concrete and present reality today! It is so important that a company accepts bitcoins, as it is interesting that it thinks about ways to invest in them. Perhaps your company could even become a mining company!
Some construction companies have started accepting payments in bitcoins. Strategies were developed to attract customers of the type:
For every R € 20,000.00 worth of purchase paid with bitcoins, the customer receives a discount of R € 1,000.00
With a 5% incentive, the purchase is more attractive and it is a great advantage for the company to have in its safe a currency that has been valued well above the real itself.
Capturing customers who pay with bitcoin is making a promising investment! The more cryptocurrencies you have in your company's “piggy”, the more your fortune will multiply following the growth of bitcoins, which have proven to be much more solid and valuable than many thought years ago.