Bitcoin

What is Bitcoin?

Milad Mirshahi25/02/2022

The purpose of this article is to give you a simple overview of the first and largest cryptocurrency in the world, Bitcoin.

So, to the question that led you here - what exactly is Bitcoin?


Bitcoin was conceptualized in 2008 as the world's first cryptocurrency. Bitcoin is the first digital currency that could be safely sent and received on the Internet without being dependent on third parties.

In addition to being a cryptocurrency, Bitcoin is also a payment network and a protocol that is secured through cryptography. All transactions and data related to bitcoins are stored and timed in a unique database that can not be manipulated, called a blockchain.

  • One thing that makes Bitcoin's blockchain unique is that no single player, company, country or person controls the protocol or network that makes it possible to send bitcoins.
  • Bitcoin's blockchain is secured and stored by a decentralized network of participants around the world, which uses data power and power to secure the blockchain.
  • Bitcoin is an open protocol. Everyone can participate in either securing the network or completing transactions.

  • There are currently around 19,000,000 bitcoins in circulation. There will only be 21,000,000 bitcoin in total. Unlike Fiat currencies that have inflation, it is not possible to create new bitcoins into circulation beyond the total number of 21 million.
  • The term for the smallest unit of Bitcoin is defined as a satoshi. 1 satoshi is equivalent to 0.00000001 BTC. This allows very small transactions that traditional money can not perform, and it is perfectly normal to own for example 0.01 BTC.

If you want to learn how to buy Bitcoin at Firi, you can do this through 3 easy steps.

Important facts about Bitcoin

  • Bitcoin is the first currency in the world that could be safely sent and received digitally without being dependent on a key player.
  • Bitcoin is a cryptocurrency, but also the protocol for the cryptocurrency is called Bitcoin.
  • All transactions related to bitcoin are stored in a database called a blockchain.
  • The Bitcoin blockchain is secured through a decentralized network of players around the world.
  • There will only be 21 million bitcoin. Beyond this, bitcoin has no inflation.

Frequently asked questions about Bitcoin

What is BTC?

BTC is an abbreviation for bitcoin.

Is BTC a cryptocurrency?

YES, bitcoin is the first successful cryptocurrency.

What is the definition of Bitcoin?

Bitcoin is digital money that allows secure and seamless transactions over the Internet directly between two parties, without the need for an intermediary.

What is the price of Bitcoin?

You can find a price overview for bitcoin here.


Is Bitcoin a good investment?

Like all other investment objects, you can make money buying bitcoin and selling at a higher price. But we can not guarantee any price development and can not give specific investment recommendations. You have to decide for yourself.

When was Bitcoin launched?

Bitcoin's white paper dates from 2008 and during 2009 the first version of Bitcoin was launched.

Who made Bitcoin?

On October 31, 2008, a so-called white paper, a research document, was published entitled "Bitcoin: A Peer-to-Peer Electronic Cash System", by an unknown person named "Satoshi Nakamoto".

In January 2009, the first bitcoin transaction took place between two computers owned by Satoshi Nakamoto and Hal Finney, who was a developer and an early cryptocurrency enthusiast.


To this day, it is not known who the founder of Bitcoin is. However, it does not take away from the security and integrity of the network, as even the founder (s) of bitcoin can not control or influence the integrity of Bitcoin's blockchain.

How does Bitcoin work?

How does Bitcoin work?

Bitcoin is an open protocol. Anyone can use the network to send, receive and store bitcoin. In practice, this is done by creating a decentralized Bitcoin wallet, and by using digital signatures.

Bitcoin's blockchain is a collection of data. Data is simply explained only information. A collection of information or data is called a database. In other words, Bitcoin's blockchain is a database that contains information.

In a bank's database, for example, the bank stores information about transactions and transfers that are made in the bank. In bitcoin's database (blockchain), information and transactions concerning bitcoin are stored.

  • Unlike, for example, a bank's database, which is stored privately, Bitcoin's database is public. Unlike a private database, which is controlled by the owner (s), the history of bitcoin's blockchain cannot be changed or manipulated.

  • Bitcoin sin blokkjede er desentralisert. I stedet for at énsentral aktør sørger for at informasjonen i blokkjeden stemmer, blir dette i stedet gjort av mange forskjellige aktører spredt verden rundt. De kan jobbe sammen, men ingen kan alene kontrollere informasjonen på blokkjeden.

  • A block chain is, as the word suggests, a chain of blocks. Every ten minutes, a new block is created in Bitcoin's blockchain, and it is in these blocks that all bitcoin data is stored.

  • Each new block stores the most important information from previous blocks, as well as new information about new transactions and balances. Bitcoin's blockchain has at all times an overview of all data and all transactions that have ever been done with bitcoins.

  • Participants who secure the blockchain, also called nodes, store a copy of all history from the bitcoin blockchain, and come to a common agreement that the information is correct using that computing power and power. Participants who only secure the blockchain using computing power and power, but who do not store a copy of the blockchain, are called miners.
How to buy and store bitcoins?

How to buy and store bitcoins?

There are primarily two ways you can buy bitcoins. You can either buy bitcoins via a crypto exchange, or you can buy bitcoins from a private person who wants to sell their bitcoins.

Regardless of the method you use, you need to store your bitcoins in a digital wallet for cryptocurrency.

You can choose between creating an account on a crypto exchange and letting the crypto exchange take care of your cryptocurrency for you (your wallet is secured by the exchange), or creating a decentralized Bitcoin wallet where you are responsible for the storage and security of your bitcoins.

Buy and store bitcoins with a crypto exchange like Firi

An easy and cheap way to buy and store bitcoins is through a crypto exchange like Firi. Firi makes it easy to buy, sell and store your bitcoins and other cryptocurrencies.

When you create an account through Firi, a Bitcoin wallet is generated for you automatically. In practice, this means that Firi securely stores your bitcoins for you and that you do not have to deal with the security of your Bitcoin wallet.

You can access your Bitcoin wallet by logging in to your user by email or tip, and by verifying yourself with BankID. You can easily send and receive bitcoins to your wallet at Firi from other exchanges or other Bitcoin wallets.


How to buy and store bitcoin in three easy steps.

Cryptocurrency can be bought 24/7, and Firi makes it easy to switch between bitcoin and NOK. In less than one business day, you can also sell your bitcoins and several other cryptocurrencies for NOK to your bank account if you wish.

Store bitcoin in a decentralized wallet


Because Bitcoin is a decentralized network, it is possible to create a separate, private Bitcoin wallet where you can store your bitcoin.

When you create a digital wallet directly on the Bitcoin network, you receive what is called a public key (public key) and a private key (private key) that is associated with your wallet.


A public key can be compared to an account number for your Bitcoin wallet. For example, if someone is going to send you bitcoins, they need access to your public key that is associated with your Bitcoin combo book.
Du kan trygt sende andre din offentlige nøkkel. En offentlig nøkkel er en kombinasjon av bokstaver og tall som er unike for din Bitcoin-lommebok.


A private key can be compared to the password of your digital wallet. A private key is a combination of letters and numbers that are unique to your Bitcoin wallet.

A private key can also be generated in the form of a seed phrase, which in practice is a backup copy of your private key. If someone has access to your private key or your seed phrase, they will also have access to all of your cryptocurrency. It is therefore important not to share your private key with anyone.

It is important to note that a Bitcoin wallet only supports bitcoins. For example, if you send bitcoin from a Bitcoin wallet to an Ethereum wallet, the bitcoins that will be sent will be gone forever without you being able to access them.


Unfortunately, at the moment, the Bitcoin and Ethereum blockchains do not "talk to each other" well enough to notify you or reverse your transaction when you send Bitcoin to an Ethereum address. Therefore, remember that they are two different blockchains, with different addresses.


It is very important that you pay attention to which public key you send and receive cryptocurrency on.

The most common way to buy bitcoins is through a cryptocurrency exchange. Firi makes it easy to buy bitcoin and other cryptocurrencies for Norwegian kroner. After you have purchased cryptocurrency from Firi, you can choose whether you want Firi to store your cryptocurrency for you, or whether you want to send it to a separate decentralized wallet.

When you create a decentralized Bitcoin wallet, a public key (public key) is generated that acts as an account number and a private key (private-key) that acts as a password for your wallet. If someone gets hold of your private key, they will have access to all of your cryptocurrency. No key player can help you get your money back if you lose access to your private key.

How is the Bitcoin blockchain secured?

How is the Bitcoin blockchain secured?

We have confirmed that nodes and miners are the ones who make sure that all data, all transactions and balances of bitcoin are correct when people send each other bitcoins.


This way of reaching a common agreement by using power and computing power is called Proof of Work (PoW), which is Bitcoin's consensus mechanism. Consensus means common agreement, and work in this context refers to the use of computing power and power.

Participants who help secure Bitcoin with Proof of Work must set up custom computers. This technical equipment participants must set up is referred to as mining rigs. It is these computers that perform the registration and storage of new transactions in the blockchain.


In practice, these computers are used for a cryptographic math problem for each new block extracted in the Bitcoin blockchain. This is how Bitcoin is structured, and for each new block there is a new math problem that must be solved by a recovery rig.


The person who owns the extraction rig that solves the math problem first receives a prize in the form of bitcoins. In practice, this means that Bitcoin's blockchain is secured through the use of incentives, and that people receive prizes in the form of bitcoins in exchange for data power and electricity use.


This is how new bitcoins come into existence until the total number of 21 million is reached. Today, this premium is 6.25 bitcoin per block and it is halved every four years. After 21 million bitcoin is reached, these prizes will stop.

The only way to actually receive such a prize in the form of bitcoin as a winner is if you verify the same information in a new block as the majority of the other winners verify in a new block.

In other words, it is not enough to just solve the math problem. There must be a common agreement that the information in the blockchain is correct. If the information you verify deviates from the information the majority (over 51%) of winners agree on, you will not be able to receive the prize of 6.25 BTC.


Example: Kari has a balance of 100 bitcoins

If 99% tell the truth, and agree that Kari has 100 bitcoins on her balance, and 1% try to fool the system by saying that Kari has 1000 bitcoins, it will be 99%, ie the majority, who win the block and who qualify themselves for prizes.


The 1% who cheat are not part of the majority, and thus do not qualify to receive a prize. Because there is a high cost of electricity required to solve these math problems, recovery becomes a losing project for those who try to lie to the network.

Because it is an incentive to tell the truth about transactions and balances on the network and that there must be a common agreement between the majority of winners, the network remains safe.

This is how the Bitcoin network was secured from the first block in 2009 to over 715,000 blocks that have been mined now, 12 years later.

There are almost 19 million Bitcoin in circulation now that have been mined so far. The process of recovery will continue until the total amount of 21 million bitcoin is extracted until the year 2140. There will never be more than 21 million bitcoin. There are almost 19 million Bitcoin in circulation now that have been extracted so far. The process of extraction will continue until the total amount of 21 million bitcoin is extracted until the year 2140. There will never be more than 21 million bitcoin.


Summary:


Bitcoin is a protocol secured by a network of participants (called nodes and miners) around the world, which takes computer power and power to reach a common agreement on the information in bitcoin's blockchain. A block chain is a chain of blocks. Each block contains data on transactions and balances that take place with bitcoins, which means that the block chain is in practice a database of information.

The mechanism used to reach a common agreement that the information in the blockchain voice is called Proof of Work, and this is done by nodes and miners using computing power and power to receive prizes by solving math problems. The process of securing the network by solving math problems is driven by an incentive - you get bitcoin as a prize for using computing power and electricity. This is how new bitcoins come into circulation until the total number of 21 million has been reached

Why does bitcoin have value?

  • Bitcoin is a global currency. Anyone can send and receive bitcoins to each other around the world, without intermediaries and without restrictions - 24/7.
  • Bitcoin is limited in number, which makes many people compare it to gold or other precious metals. Over time, bitcoin, like gold, has managed to maintain and increase in value and purchasing power over time, which makes it seen as a good investment object.
  • Bitcoin is private. No key player controls your personal information and data.
  • Bitcoin is the first implementation of a functioning blockchain and a digital currency on the Internet that does not require trust. With fiat currencies (dollars, euros and Norwegian kroner), central banks can issue as many currency units as they want, and can try to influence the value of the currency or inflation. This is not possible with bitcoin.
  • Bitcoin is the largest decentralized network in the world. As the most decentralized network, this also indicates that bitcoin is the most secure and distributed public blockchain in the world to trade with. Due to the decentralized nature of bitcoin, you do not need to release sensitive information about yourself.
  • Developers around the world who build on bitcoin's open protocol. This means that bitcoin's potential is constantly increasing over the years. An example of this is the Lightning network, which is a scaling network that will enable bitcoin to function as a means of payment with microtransactions in the future.
  • It can also be argued that bitcoin has an inherent economic value as a result of the cost of creating new bitcoins until the total number of 21 million bitcoins is reached. Extraction of bitcoin is energy intensive, and this constitutes a real expense for winners.

Bitcoin exchange rate and price development


The picture shows a logarithmic chart with the price development of bitcoin since the first years and until today. As you can see, bitcoin, despite large short-term fluctuations, has had an impressive price increase since its inception. It can also be seen that this trend is still intact. (Image taken from Tradingview).

Bitcoin had no monetary value when it was first created in January 2009. It was not until almost 1.5 years later on July 17, 2010 that the price jumped to $ 0.09 when someone bought bitcoin at this value on the open market. Bitcoin had no monetary value when it was first created in January 2009. It was not until almost 1.5 years later on July 17, 2010 that the price jumped to $ 0.09 when someone bought bitcoin at this value on the open market.



On November 10, 2021, Bitcoin reached its highest ever rate of 69,044.77 for 1 bitcoin. The price of bitcoin at the time of writing is $ 35,000.


What determines the value of bitcoin is the open market, and people can buy and sell bitcoin at any time through crypto exchanges or individuals.


Read more about Bitcoin's price development throughout history here.

Summary:

Bitcoin was the first working way to send money globally without an intermediary. In addition to being the world's largest cryptocurrency in stock market value, Bitcoin is also the most decentralized network in the world. Many people consider bitcoin a good investment because the cryptocurrency has historically increased in value over time. Blockchain technology introduced a new way of creating data, which is also used by the majority of the largest companies in the world today.

We hope this article made it a little easier for you to understand Bitcoin and the technology behind it. For example, if you are interested in reading about more cryptocurrencies, you can check out this article on Ethereum, the world's second largest cryptocurrency.