The Bitcoin exchange and the Blockchain
To understand the Bitcoin exchange, you must first comprehend the technology behind it, which is the Blockchain. In the introduction part of this guide, we informed you about the history of the Blockchain and how it came to be. Now, we will get more technical and explain how it works. It was first built by Satoshi Nakamoto, the creator/s of the Bitcoin, through the perfect combination of three previous technologies:
- The private key (Cryptography)
- P2P Network
- The Blockchain protocol
The result was a decentralised network that eliminated the third party and provided users with high security and anonymity. Authentication and authorisation were reinvented with the Blockchain, and the public and private keys allowed people to “trust” more in the virtual world.
Digital transactions and the way the information was stored, where ownership was no longer an issue, made the Bitcoin possible. Moreover, the whole appeal of the Bitcoin exchange comes down to the fact that is not issued by any government, and the P2P technology makes it hard for hackers to corrupt the data. Once a block is added to the ledger, the information about the transaction can no longer be changed.
What is Bitcoin?
As the first cryptocurrency on the market, Bitcoin remains the principal of all other cryptocurrencies, especially when it comes to market capitalisation. However, the other crypto coins are also gaining traction as time passes and, since the beginning of April 2018, Ether, Ripple, Bitcoin Cash, EOS and the others are moving up on the market cap scale more swiftly.
What is Bitcoin?
First, we are going to start off by clarifying the Bitcoin token, also commonly known as the Bitcoin, that you buy on the virtual exchange. This token is the one you, as a trader, should be interested in.
In technical terms, the Bitcoin is code that embodies the ownership of a virtual concept. In today’s world, that means that the Bitcoin is a digital currency you can use to buy services and goods. You can invest in it or trade it on a Bitcoin exchange, just like any other commodity.
Except, Bitcoin, in its nature, is nothing like an ordinary commodity that appeared on the financial market, and its characteristics make it even more appealing than any other virtual concept that came before. The features of this cryptocurrency are the best way to answer the question what is Bitcoin.
- Decentralisation - No financial institution or government controls the issuance of Bitcoins, making it the first decentralised currency in the world. The Bitcoin network is open, and a single person, organisation or group does not control it.
- Limited stock - The limited supply of Bitcoins is set at 21 million, which makes the coin a very desirable possession and highly tradeable for future profits.
- Security - A fiat transaction can be reversed, but a crypto transaction on the other cannot be modified. As we mentioned above, once the block of information is added to the ledger, it is permanent and cannot be changed.
- Divisibility - The Bitcoin is made out of small units called satoshi. One satoshi is a one hundred millionth of a Bitcoin, and this divisibility of the coin enables microtransactions.
Bitcoin trading comes after you purchased your first Bitcoins, stored them in a digital wallet and have opened an account on a verified online exchange. For traders and brokers, Bitcoin trading is the reason they enter in this unique cryptocurrency world. The possibility of considerable financial success or a massive botch comes hand-in-hand with the volatility of the Bitcoin.
The prices of every other cryptocurrency, including the Bitcoin, can go up and down at any given moment and are influenced by a lot of external factors, some of which are still unidentified by experts.
What everyone agrees on is that the price of the world’s most famous cryptocurrency is worth what people decide to pay for it. The supply and demand variables dictate every market, including the cryptocurrency one, but the more liberal rules of the new Bitcoin exchanges are very appealing to traders and individuals all around the globe.