Introduction to Bitcoin
Bitcoin is the world's largest cryptocurrency, designed with a specific purpose: to create electronic cash. Its technology enables peer-to-peer money transfers without centralized intermediaries, much like physical cash transactions. BTC serves as the unit of account on the Bitcoin blockchain, meaning users can only transfer BTC to one another.
One of Bitcoin's key advantages is that no bank regulates the funds circulating on its network, ensuring user privacy and financial security. No single entity has the power to modify its database—a consequence of both geographical and political decentralization among Bitcoin's supporters and the cryptographic techniques implemented at its launch in 2009.
Bitcoin was created by cypherpunks, activists using cryptography to protect internet privacy, with the goal of establishing an alternative monetary system in response to the 2008 financial crisis. Today, used by hundreds of millions globally, Bitcoin has become a symbol of individual freedom.
How the Bitcoin Blockchain Works
Despite its enigmatic appearance, Bitcoin isn't as difficult to understand as it might seem. Its architecture draws from several technologies used for decades across military, computing, accounting, and finance sectors.
The Foundation: Blockchain Technology
The blockchain is the underlying technology of Bitcoin, comparable to a digital ledger that records and archives all bitcoin transactions. Unlike a centralized Excel spreadsheet managed by a single entity, Bitcoin's blockchain is decentralized, transparent, and immutable.
Decentralization: Bitcoin's ledger is maintained by thousands of "nodes" worldwide—servers operated by individuals and companies storing the blockchain. Anyone with suitable hardware can deploy a node.
Transparency: All information recorded on the blockchain is publicly accessible on the internet. To protect individual privacy, users operate under pseudonyms composed of alphanumeric strings (e.g., "1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa"). This ensures privacy while allowing monitoring of fund movements associated with illegal activities.
Immutability: Since the blockchain operates on consensus among thousands of unrelated participants, it's impossible to alter already recorded information. Illegitimate modifications, such as bitcoin duplication, are rejected by nodes due to transaction transparency.
These three strengths enable the Bitcoin blockchain to provide an extremely secure service worldwide without interruption. Anyone with an internet connection can send money without traditional financial institutions.
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Bitcoin vs. Traditional Banking: Key Differences
Unlike sending €1,000 from France to obtain South Korean won through intermediaries charging 1% commissions (with reverse transactions being even more cumbersome), Bitcoin enables €1,000 transfers received in minutes regardless of time or day, without corporate permissions. This applies anywhere globally.
The blockchain doesn't store user money—only transaction data. Thus, every bitcoin holder is the sole sovereign of their funds, making Bitcoin a true peer-to-peer network without intermediaries.
Blocks of transactions are generated approximately every 10 minutes, with each block linked to its predecessor and successor—hence the term "blockchain" or "chain of blocks."
How to Use Bitcoin (BTC)
As bitcoins are a form of computerized money, they're stored in digital wallets. But how does a Bitcoin wallet connect to the blockchain? It's all about addresses and keys.
Understanding Bitcoin Wallets and Keys
Each Bitcoin wallet is associated with a randomly generated alphanumeric string (an address) created upon setup. This address, representing the pseudonym mentioned earlier, is recorded on the blockchain and enables receiving funds from other bitcoin holders.
Addresses function similarly to bank account numbers (like IBAN numbers), while digital wallets resemble bank accounts: with your credentials, you can access your addresses and bitcoins on any device and spend them as you wish.
Although all Bitcoin wallet addresses are publicly visible on the blockchain, they derive from cryptographic operations that ensure data integrity. Public addresses stem from public keys, which themselves emanate from private keys.
A wallet's private key allows sending BTC, while the public key primarily enables receiving. Both consist of alphanumeric character strings.
Think of your blockchain address as a postal address, with your public key as your mailbox: impossible to receive mail without it. The private key represents the key that opens the mailbox to access its contents.
The alphanumeric pseudonym representing the blockchain address results from the SHA-256 hash function applied to the public key's character sequence. Originating from the US National Security Agency (NSA), the SHA-256 function encrypts information unidirectionally, generating an alphanumeric sequence from any data.
With SHA-256, it's impossible to retrieve the public key that generated an address based solely on that address. Similarly, a public key itself results from the ECDSA function applied to a private key—another one-way generation process where nobody can retrieve the private key from the public key.
Securing Your Bitcoin Holdings
In a Bitcoin digital wallet, the private key is materialized through your password and recovery phrase. The recovery phrase consists of 12-24 words providing access to your wallet from any internet-connected device. If someone obtains your password or recovery phrase, they can steal your BTC by sending them to their own address—irreversibly.
Remain vigilant about storing your credentials.
In summary, a Bitcoin wallet enables sending and receiving bitcoins. A combination of technologies (blockchain address, public key, private key) provides unparalleled fund protection while ensuring blockchain transparency and wallet functionality. Dozens of reliable Bitcoin wallets are now available to the public.
How New Bitcoins Are Created
Unlike fiat currencies like the euro or dollar, bitcoins aren't created from nothing. Their generation is regulated by rules implemented in its protocol collectively called Proof of Work. Over 19.5 million bitcoins were in circulation by 2022, with the maximum capped at 21 million units to be reached by 2140.
The Mining Process
To generate new BTC, the Bitcoin blockchain relies on entities called miners. Like nodes, miners can store the blockchain's complete data, but their primary role is recording users' new transactions onto the blockchain as blocks. In exchange, they receive bitcoin rewards—hence "mining" Bitcoin.
On the Bitcoin blockchain, a transaction block is generated approximately every 10 minutes, each associated with a 6.25 BTC reward (this reward halves every 4 years through halving). Thus, the first miner to record transactions in the ledger alone receives these new bitcoins—how new BTC enter the market.
To select the winner of newly emitted BTC for each block, the Bitcoin protocol ranks miners based on computational power deployed to solve a mathematical function. This involves finding encrypted data using SHA-256 on information contained in the block, including the nonce.
Understanding Mining Difficulty
A blockchain block contains five essential components: its transactions, timestamp, previous block's hash (linking blocks together), block version, and the nonce. The nonce represents the only variable data miners must modify to find the block's cryptographic solution—a number changed infinitely until it matches Bitcoin protocol expectations.
The greater a miner's computational power, the higher their probability of solving this computational puzzle. Consequently, machine computational power directly determines chances of being designated to mine a block and receive associated BTC.
However, Bitcoin's blockchain was designed to adapt to increasing network computational power. To maintain consistent block production speed (10 minutes), its founder incorporated a functionality adjusting this mathematical problem's difficulty according to total computational power deployed by all miners.
Although mining Bitcoin with a personal computer was possible in 2011-2012, this activity has transformed into a full-fledged industry. Professional miners now often collaborate in "mining pools" to smooth their BTC returns by pooling computational resources.
Network Security and the 51% Attack
Currently, only one method exists for malicious actors to control Bitcoin's network: the 51% attack. This involves gathering over half the computational power used for Bitcoin's blockchain. Success would enable producing most network blocks and recording desired information. However, current computational power makes this feat impossible for any single entity.
Hashrate typically measures computational power variations. Since its appearance in 2009, Bitcoin blockchain's hashrate has never stopped growing, meaning the network becomes progressively more secure yearly as 51% attack chances diminish.
Environmental Considerations
With rising computational power, increasing concerns have emerged about Bitcoin mining's environmental impact. According to the Cambridge Centre for Alternative Finance (CCAF), miner energy consumption equals that of countries like Belgium—approximately 0.4% of global annual energy consumption.
As this new industry develops, less electricity-intensive mining machines emerge. Bitcoin mining has also become a tool for some companies to utilize energy surplus: instead wasting unconsumed energy, they use this electricity to mine BTC while heating premises with machine-emitted heat.
Bitcoin increasingly uses renewable energy sources to reduce planetary impact. With new mining machines rapidly entering the market, we can reasonably hope for pollution reduction in coming years.
Key Bitcoin Protocol Rules
As emphasized earlier, Bitcoin is primarily a computer protocol: its blockchain operation, cryptocurrency technical specifics, and BTC emission are governed by inflexible principles.
Understanding Bitcoin Halving
Halving is an event occurring every 210,000 blocks (approximately every 4 years) that halves bitcoin rewards miners obtain per block. When Bitcoin launched in 2009, the reward per transaction block was 50 BTC. Subsequent halvings (2012; 2016; 2020) reduced miner BTC remuneration to 6.25 BTC today.
This mechanism was specifically implemented to control bitcoin generation and prevent high network inflation long-term. As years pass, bitcoin production quantity decreases. Counting bitcoins inaccessible due to lost private keys, Bitcoin cryptocurrency inflation decreases and trends toward 0% long-term.
The number of bitcoins in circulation will never exceed 21 million BTC. Half of BTC were already emitted between 2009-2013, while the symbolic 90% cap was reached in 2022.
Block Duration and Size
Bitcoin transaction blocks were programmed with specific rules: they must be generated every 10 minutes, offer bitcoins to miners recording them on the blockchain, and not exceed 1MB weight.
These parameters directly influence Bitcoin's value and network efficiency. Currently, its network processes approximately 7 transactions per second (TPS). Comparatively, Visa's payment system records between 1,500-2,000 transactions per second, with theoretical performance reaching 65,000 TPS.
To improve Bitcoin blockchain performance and compete with current payment systems, developers maintaining and enhancing its protocol explore solutions. One famous implemented solution is SegWit.
What is SegWit?
Integrated into Bitcoin in August 2017, SegWit's update code increased transactions contained in a single block without modifying its weight. Developers created a system moving non-essential information outside blocks.
This space gain doubled transactions supported by the blockchain. However, 7 transactions per second remains too low to rival international payment systems. This is why Lightning Network appeared in 2018.
Still in beta, Lightning Network is a layer built atop Bitcoin that processes thousands of transactions per second almost instantaneously, with transaction fees around euro cents.
Blockchain Forks and Competition
Despite Bitcoin protocol rules, two transaction blocks can appear simultaneously on the blockchain if two miners simultaneously record their transaction blocks. In this case, the blockchain cannot continue on both branches: miners must continue work on one block and abandon the second.
In atypical cases, the blockchain sometimes splits into two separate networks without miners making a unified choice between branches. This blockchain split into distinct networks is called a "fork."
Forks generally occur when a blockchain community divides into two or more radically opposed groups. When these groups can no longer coexist on the same blockchain, a breaking point divides the blockchain: each group moves to the blockchain branch best matching their ideas.
This happened in 2017 when the SegWit2X update proposal was replaced by SegWit. Instead of moving certain transaction block data, SegWit2X wanted to simply increase block size from 1MB to 2MB.
Many developers opposed this update because SegWit2X would have reduced Bitcoin blockchain decentralization by加重ing its blockchain. Since blocks would have been twice as heavy, processed transactions per second would also have doubled. Such modification would have reduced node numbers: for some servers, the blockchain would have quickly become too heavy to maintain on their machines.
Consequently, SegWit2X advocates forked Bitcoin's blockchain to implement their update on their blockchain—now known as Bitcoin Cash (BCH). Conversely, most people (those opposing this update) remained on Bitcoin (BTC) blockchain.
Methods to Acquire and Store Bitcoin
Today, buying Bitcoin is as simple as buying bread from a baker: achievable in few clicks with a bank card via smartphone.
Where and How to Buy Bitcoin
As Bitcoin is the world's premier cryptocurrency, multiple purchase methods exist. Currently, the most popular involves "exchanges" or "brokers"—platforms dedicated to buying and selling cryptocurrencies.
In France, the most important regulated exchanges and brokers include Binance, Coinbase, eToro, Bitpanda, and Trade Republic. These platforms share being regulated in France through their digital asset service provider (PSAN) status.
The PSAN represents both registration and approval delivered by the Financial Markets Authority (AMF), the independent authority responsible for client protection in financial sectors. Obtaining PSAN registration provides quality assurance as companies must respect strict rules to maintain national regulation compliance and offer services legally in France.
Among existing exchanges, some offer beginner-friendly platforms with low transaction fees. Companies with over 15 years experience have distinguished themselves through innovative services, longevity, and support of numerous financial markets including cryptocurrencies.
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Storing Bitcoin Securely
Since Bitcoin was created to eliminate financial world intermediaries, some investors choose this path by storing bitcoins themselves. In other words, they withdraw bitcoins from platforms to reclaim complete asset control. Two primary methods currently exist for exporting BTC from exchanges.
The first involves storing bitcoins on a digital wallet. Nicknamed "wallets," these tools store BTC outside exchanges like eToro or Binance. Typically deployed as mobile applications or web browser extensions, popular Bitcoin-compatible digital wallets include Zengo, Exodus, and Bridge Wallet.
To transfer funds to a Bitcoin wallet, simply log into the exchange holding your BTC, then enter your wallet's Bitcoin address and transfer amount.
Normally, registering a Bitcoin address on an exchange is straightforward: copy/paste from your digital wallet. However, maintaining high security requires verifying first and last characters comprising this address. Before sending all funds to an external wallet, we suggest an initial small-sum transaction to verify process safety.
The second solution involves acquiring a hardware wallet—a physical object significantly increasing resilience against hackers. Priced typically between €50-200 depending on models, this tool represents one of the best investments for protecting bitcoins.
Its offline operation prevents anyone from accessing your funds. Current market leaders include Ledger and Trezor—French and Czech companies respectively.
Hardware wallets behave like standard wallets with enhanced security. They enable creating one or multiple blockchain addresses to import your bitcoins. Products from Trezor and Ledger support dozens of different blockchains and cryptocurrencies, including major ones like ETH and BNB.
These products target investors seeking long-term cryptocurrency storage and those desiring highest security levels within reasonable price ranges.
Factors Influencing Bitcoin's Price
In many respects, buying Bitcoin can seem intimidating: between price variations, different crypto ecosystem news, and negative media portrayal, distinguishing truth from falsehood proves challenging.
To help navigate, here are key themes to monitor for understanding BTC's upward and downward variations.
Bitcoin's Cyclical Rhythm with Halving
Every 4 years, halving imposes a 50% reduction in Bitcoin network rewards allocated to miners. This process primarily decreases Bitcoin protocol inflation and increases BTC scarcity since fewer bitcoins are produced within identical timeframes.
Since 2009, each halving prompted significant Bitcoin price increases. This occurred in 2012, 2016, and 2020.
According to Bitcoin price data, its value always exploded upward during the 12 months following halving. Thus, halving serves as a reference point for investors attempting to anticipate the cryptocurrency king's rise.
International Politics and Jurisprudence
Cryptocurrency regulation across different countries influences cryptocurrency prices. As in many technological sectors, the United States represents the most influential state regarding Bitcoin's evolution.
Understanding BTC variations requires staying informed about laws and latest innovations appearing across the Atlantic. For example, between June and December 2023, enthusiasm for spot Bitcoin ETFs propelled Bitcoin's price from $25,000 to $49,000.
Additionally, each decision undertaken by the Securities and Exchange Commission (SEC)—the US institution dedicated to financial market regulation—concerning sector companies can influence not only BTC but also other crypto prices, as during the Ripple and XRP token affair.
Other countries significantly influence Bitcoin. By prohibiting cryptocurrency mining on its territory, China contributed to BTC's temporary fall during summer 2021. Geopolitics therefore represents a key theme to watch for better understanding cryptos.
Corporate Successes and Failures
As Bitcoin constitutes the crypto market's major asset, its price is directly influenced by sector companies' economic health, and vice versa. This means when an important crypto ecosystem company declares difficulties, BTC's price may suffer consequences.
For example, during Bitcoin industry beginnings in 2013, Mt. Gox was the world's first cryptocurrency exchange, generating nearly 70% of bitcoin transactions at its activity peak. However, the platform was forced to close in February 2014 following a hack resulting in 850,000 BTC loss. The era's largest crypto hub hacking provoked the cryptocurrency king's plunge.
More recently, other corporate scandals strongly influenced its price, like the fallen FTX exchange.
International Monetary Policy
Whether cryptocurrency markets or traditional financial markets, all suffer influence from international monetary policies, particularly the US Federal Reserve's (Fed)—the country's central bank.
Simply put, monetary policy describes actions increasing or decreasing a currency's money supply to meet economic objectives. This policy involves raising and lowering central bank interest rates, directly influencing rates offered by commercial banks to their clients.
For example, confronting Covid-19 health crisis, the Fed lowered its interest rate to 0%. Since loans became affordable for all, investors injected immense liquidity quantities into financial markets. This partially explains stock indices and Bitcoin's historical records in 2021.
Conversely, when worldwide financial institutions chose radically increasing interest rates in 2022, stock actions and cryptocurrencies lost value. Monitoring central bank operations, especially the Fed's, remains essential for understanding Bitcoin price variations.
Frequently Asked Questions About Bitcoin
✅ What is Bitcoin and how does it work?
Bitcoin is the most famous cryptocurrency. It relies on blockchain technology, enabling anyone to send and receive money worldwide without banking intermediaries. Its primary interest lies in being an alternative financial system offering certain economic freedom degrees. Increasing financial companies interest themselves in cryptocurrency for its socioeconomic advantages, like BlackRock—the world's largest asset manager with $10 trillion under management.
✅ Is Bitcoin regulated in France?
In France, Bitcoin is regulated like numerous cryptocurrencies. Since 2019, the Pacte law regulated this activity sector by creating capital gains tax but also establishing digital asset service provider (PSAN) status. Internationally, the European Union voted Markets in Crypto-Assets (MiCA) and Transfer of Funds Regulation (TFR) texts in 2023 to regulate Bitcoin and cryptocurrencies internationally.
✅ Can Bitcoin collapse to €0?
Like stock market actions and commodity markets, Bitcoin's value depends essentially on supply and demand. The primary reason pushing its price to collapse would be blockchain hacking. However, its infrastructure is so resilient that it's one of the few in computing world never hacked.
✅ Who holds the most bitcoin?
In early 2024, the largest bitcoin holder remains Satoshi Nakamoto. Alone, he holds over 1.1 million BTC. Ranking high, we also find MicroStrategy with its 200,000 BTC. Led by Michael Saylor, MicroStrategy is the world's company possessing the most bitcoin.
✅ How many French currently hold Bitcoin?
According to a 2023 study published by Adan, 9.4% of French hold cryptocurrencies and non-fungible tokens (NFT). Conducted by KPMG and Ipsos, this survey demonstrates Bitcoin's growing popularity among French population.
✅ Can Bitcoin be hacked?
Since its 2009 creation, Bitcoin's network has been administered decentralizedly through Proof of Work technology. Thanks to this method, even largest multinationals and governments cannot hack its blockchain, given the immense computational power required. Moreover, hacking Bitcoin wouldn't be economically viable since BTC would lose their value.
✅ Why do multiple Bitcoins exist?
Since Bitcoin is primarily an open-source project, any developer can copy its source code. Thus, when some people disagree with updates implemented on Bitcoin, they choose to retrieve its data and code to create a "new Bitcoin" matching their vision. Among these, we find Bitcoin Cash (BCH), Bitcoin SV (BSV), and Bitcoin Gold (BTG). Note these cryptocurrencies' valuation holds no connection to Bitcoin (BTC).