The Bitcoin exchange rate is currently declining. Nevertheless, many may wonder if it is worth getting in when the price is low. The classic stock jargon also says “buy low, sell high”.
However, it is always a bad idea to invest in something you do not understand. For crypto fans who are already deep inside the case, it is sometimes difficult to explain the complexity of digital gold to the so-called “no-coiners” in simple language.
Down with the bitcoin jargon
Therefore, it is especially important to use simple language and not to claim completeness. Some details, such as when the next BTC halving will take place, or what changes the Taproot update has brought to the Bitcoin network, can be omitted for the time being.
The version for grandma and grandpa
We go to the grocery store around the corner. Products are sold there by manufacturers that the retailer of the store has previously purchased there. All groceries are exhibited and priced in the store. You can then pay accordingly at checkout.
Exchange of goods is also possible with blockchain technology. However, everything is done digitally. With blockchain, you no longer have to walk around the corner to the store because the technology allows you to shop directly with the milk producer and skip the intermediate step in the grocery store.
This is possible because in the context of blockchain, it is not just one organization that is responsible. Power is distributed among all participants – be it the farmer or Hans Müller, who must have milk for his coffee party. The blockchain acts as an account book where all transactions are written down.
Because everyone has the same buying and selling information, incorrect information is quickly discovered and can be rejected. Even after the fact, information about transactions made cannot be changed.
Blockchain technology also forms the basis of Bitcoin. Bitcoin is a digital currency and payment system in one. For example, you are no longer dependent on banks to perform the transfers – the blockchain does not require intermediaries. Moreover, no one can get in the way of the Bitcoin network: It is not controlled by the state and is therefore secured against censorship.
The version of technology affine
In this version, we have gone a little further and explained some details about blockchain technology and Bitcoin. You can read more about this in the slideshow.
Bitcoin: An Explanation of Technology Affinity
The version for those interested in crypto
For those who are already familiar with Bitcoin but would like to take a look outside the box, you should visit our BTC Academy. There you can get information from A for Altcoin to Z for centralization.
If this is not enough, we recommend the monthly BTC-ECHO magazine. There you will find exciting background reports, reports and interviews on the topic of Bitcoin, Blockchain and Co.
Why do you need Bitcoin at all?
Bitcoin is a censorship-resistant, decentralized, transparent and transnational digital currency that can also be used quickly and cheaply. Because of these characteristics, many are talking about a democratization of money. The limit of 21 million Bitcoin should also help the network to have a deflationary effect, which means that BTC will increase in value due to this shortage.
Who has control over Bitcoin?
In general, it is the network participants who democratically make decisions for the Bitcoin blockchain. The so-called “Bitcoin Core Maintainers” are responsible for the implementation of various decisions. This is a small group of developers who have the ability to change the bitcoin code for the benefit of the community. However, you can only make certain adjustments if the community has given your prior consent.
How secure is bitcoin?
Thanks to cryptography – the science of encryption and decryption – blockchain is considered one of the most secure technologies of all. For example, the decentralized nature of Bitcoin makes it very difficult, if not impossible, to hack the network. Because not only one central unit, but tens of thousands of network nodes have a copy of the Bitcoin code, an attack on all these participants would have to take place simultaneously, which is technically almost impossible.
Does it not use a lot of energy?
Yes, the consensus mechanism in the Bitcoin network (Proof of Work) is energy intensive. However, the discussion does not end with this statement. On the one hand, it is very difficult to find reliable data on bitcoin’s energy consumption and also on how exactly the energy mix looks. On the other hand, you need to ask yourself what you are willing to spend energy on. For example, the annual Christmas lights in the United States use significantly more energy.
Do you want to buy cryptocurrencies?
eToro offers investors, from beginners to experts, a comprehensive crypto trading experience on a powerful yet user-friendly platform. *
To the provider