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Bitcoin and Cryptocurrency: Knowing Everything to Understand Everything, and Invest

In this article, we explain step by step the basics to understand virtual currencies and invest correctly, if you are willing to take the risk.
This article is the first part of a file in which we will address questions such as: what is a cryptocurrency? What can they serve? How does the blockchain work? Is it legal … as well as the basics of investing: what are the risks? How to buy, sell and store cryptocurrencies … We encourage you to act intelligently and cautiously on this point: we must never invest more than we can afford to lose. We will publish the other parts of this file in the coming weeks.

We hear a lot about Bitcoin, the virtual cryptographic currency whose value has peaked in recent months. Both simple in principle and very technical in its operation, it fuels the worst fears as the highest hopes.

Bitcoin involves technology, money, mathematics, economics and social dynamics. It is constantly evolving and has many facets. In this article, we explain where this virtual currency comes from and, in a very synthetic way, how it works.

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First, a bit of history

Bitcoin was invented in 2009 by a person or a group of people answering the pseudonym of Satoshi Nakamoto and whose real identity remains unknown to this day. This virtual currency, which is based on cryptography, was born from the Great Recession of 2007-2012, which followed the subprime mortgage crisis in the United States.

The mother of all cryptocurrencies, Bitcoin has been thought of as a tool to fight the corruption of the financial system by replacing trusted third parties (banks) with cryptography and computer code.

A decentralized and non-vertical system whose credibility relies solely on technology. In 2011, Nakamoto forwarded the source code and domain names to the Bitcoin community and disappeared from the radars.

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Trezor bitcoin wallet, Black
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For the anecdote, know that thanks to Bitcoin, Satoshi Nakamoto has become several times billionaire, at least on paper. He also made many millionaires among some pioneering investors who bet on this cryptocurrency.

The twin Winklevoss brothers, who received $ 65 million in compensation for the initial idea that led to the creation of Facebook, invested very early in Bitcoin. Today, they hold one of the largest portfolios in the world, whose current value exceeds $ 1 billion.

Bitcoin, decentralized digital currency

To put it simply, Bitcoin is a digital currency. No ticket to print or coins to hit. It is decentralized, ie no government or institution controls it, and allows direct payments between two parties (peer-to-peer) intermediaries that are banks or payment networks (Mastercard, Visa …), and therefore fees they collect. However, you will see that Bitcoin transactions are not free.

Owners of Bitcoins enjoy an (increasingly) relative anonymity. Buyers and sellers are linked by encryption keys, but platforms that allow you to buy them require a number of documents to prove and verify your identity.

The Bitcoin protocol is based on a complex and exciting technology called Blockchain, or blockchain in French. But we will see how it works a little later.

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You may be wondering now what can be done with the virtual money? For the moment, around 100,000 e-merchants accept Bitcoins payments but still very few major retailers. You can also sell your Bitcoins or save them.

Note that for each transaction, the Bitcoin protocol automatically charges fees (payor side). In addition to these fees, you will also find platforms if you buy or sell your virtual money via a marketplace such as Coinbase. And yes, decentralized does not mean completely free.

In the next part of this issue, we will see how the blockchain technology works and the uses that resulted from it.

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