Le Bitcoin intrigues, worries and fascinates, and for some time all the general media have been interested in it. I decided to take stock of this invention: what are Bitcoins? How it works ? Qhat are its advantages and disadvantages.
What is Bitcoin?
Bitcoin is a peer-to-peer payment system. It is a virtual currency not dependent on any central bank and which allows you to pay for online purchases anonymously without taxes and without an intermediary.
It is possible to exchange Bitcoins for other currencies, making it a real monetary currency subject to speculation.
Stored in a wallet digital (a simple software), transactions are encrypted : we do not know who sends and who receives the money which, for some, would encourage illicit trade.
Besides, everyone started talking about Bitcoin when the site Silk Road, a drug supermarket in the darknet. However, Bitcoin is not a concept created by mafiosi. This is a global experience…
How does bitcoin work?
Bitcoin works with software and a protocol that allows users to issue bitcoins and manage transactions collectively and automatically.
The proper functioning of the exchanges is guaranteed by a general organization that everyone can examine, because everything is public: the basic protocols, the cryptographic algorithms used, the programs making them operational, the data of the accounts and the discussions of the developers.
Bitcoin is based on a distributed database: the blockchain. It is to be seen as a very, very large ledger which contains all the transactions carried out. This database is replicated on all Bitcoin users.
The blockchain being accessible to all, everyone can see the transactions. Here is a site for consult the blockchain and see detailed information about all Bitcoin transactions and blocks.
The currency is generated automatically by "mining". The "miners" perform calculations for the network to confirm transactions. As a reward for their services, they collect percentages of Bitcoin for each validated move.
How to get bitcoin?
Don't panic, using bitcoins is simple. It is possible to get started with Bitcoin without understanding the technical details. Just follow these few steps:
To get started, download and install a wallet on your computer. The wallet is software that allows you to send and receive bitcoins.
There are many different wallet software options available, depending on how you want to use Bitcoin. They can be installed under windows, linux, android, Mac…but also online on a web server (be careful of piracy!) Choose your wallet here.
In this tutorial I will be using the official bitcoin core, the most used wallet to date.
After installing the wallet software on your machine, double click on it and launch it.
Here is the longest part! As we saw above, Bitcoin works through a ledger where all transactions are recorded definitively. This ledger is called the blockchain and you too must download it in order to use Bitcoin.
To operate efficiently and in real time between all users, your wallet must store all the transactions carried out since the birth of the Bitcoin network.
Since it's the first time, the software will download and store a copy of the bitcoin blockchain. You will need at least 80GB to store all of the blockchain data.
This can take several hours given that it is very heavy, several dozen GB. I advise you to leave your computer running overnight for example. Note that this operation only needs to be done once.
After the blockchain is downloaded, you can use your wallet quite normally. You can generate new addresses to accept payments in order to credit your account.
To do this, go to the “ Receive“. Simply fill in the field “ TAGS » in order to know where the payments you will receive come from, the other fields are optional.
Then simply click on “Payment Request” and an address will be generated.
The window that then opens allows you to retrieve the address (by copying it to the clipboard).
This address, with its label, is also added to the list of your reception addresses where a simple double click will display the information for this address.
Benefits
- Bitcoin allows person-to-person transactions to be carried out worldwide, without any intermediaries. This implies much lower transaction fees than those of Visa, Mastercard or Paypal.
- Transactions are anonymous. However, transactions are public and shared with all users, but nothing links your account number to your real identity.
- No limit on the amounts transferred, it is possible to send and receive any amount.
Drawbacks
- Its main problem is its extreme volatility. Its value can vary enormously even within 24 hours.
- You must have a minimum of computer knowledge to use bitcoins. This currency is not yet very accessible to the general public.
- Holders of bitcoins can only sell them if other users wish to acquire them. Thus the system can collapse at any time when investors want to change their positions but find themselves holding portfolios that have become illiquid.
- Bitcoin currently operates outside of a defined legal framework.
- Although the bitcoin system is well protected, it is still possible to hack the data on your PC and make a transfer in your name.