Bitcoin is not a very easy concept to understand, but it is increasingly having a greater presence in the financial system, so it is worthwhile for us to have a better idea of what this asset is and what its advantages are.
To explain it in a nutshell: Bitcoin is a digital currency or cryptocurrency that is used for online transactions. But unlike traditional currencies such as the dollar or the euro, Belitcoin is not backed by a government or central bank. Instead, it is based on a decentralized ledger technology called blockchain.
To better understand how this cryptocurrency works, imagine that you have an online bank account. Instead of having a bank act as an intermediary, Bitcoin uses a network of computers around the world that work together to record and verify transactions. And this network is the aforementioned blockchain.
How blockchain technology works
Every time someone makes a transaction with Bitcoin, that transaction is recorded in a block on the blockchain. Miners, who are people who use your computers to help maintain the network, verify and accept these transactions.
Once a block is accepted, it is added to the blockchain and cannot be modified. This means that Bitcoin transactions are secure and transparent, as they are visible to all.
Decentralized asset and little manipulable
One of the most important advantages of Bitcoin is that it is decentralized, so it is not controlled by a single individual or institution. Instead, it is controlled by all users on the network. This helps make it less prone to manipulation.
Privacy in transactions
Another advantage is that it is safe and anonymous. And it is that, when making a transaction with Bitcoin, you do not have to provide personal information, such as your name or address. Instead, you use a Bitcoin address, which is a series of numbers and letters, to complete the transaction.
It is important to mention that the value of Bitcoin is highly volatile, so it can change significantly in a short period of time. Also, because it is not backed by a physical asset, it has no intrinsic value. Therefore, it is considered a high risk investment and is not suitable for all types of investors.