Le Bitcoin intrigues, worries and fascinates, and for some time all the mainstream 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.
Bitcoin, what is it?
Bitcoin is a peer-to-peer payment system. It is a virtual currency that does not depend on any central bank and that allows you to anonymously pay for online purchases without tax and without intermediaries.
It is possible to exchange Bitcoins for other currencies which makes 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 promote illicit trade.
By the way, everyone started talking about Bitcoin when the Silk Road site, a drug supermarket in the darknet. However, Bitcoin is not a concept created by mobsters. This is a worldwide 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 easy. 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. 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 registered 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 this is 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 since it is very heavy, several tens of GB. I advise you to leave your computer running overnight for example. Note that this should only 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". Just fill in the"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 opens allows you to retrieve the address (by copying it to the clipboard).
This address, with its label, are also added to the list of your receiving addresses where a simple double click will display the information for this address.
Benefits
- Bitcoin makes it possible to carry out person-to-person transactions all over the world, without any intermediary. 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 in 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.
- Bitcoin holders 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 is currently evolving outside a defined legal framework.
- Although the bitcoin system is effectively protected, it is still possible to hack the data that is on your PC and make a transfer on your behalf.