What is bitcoin?

1) Bitcoin - Simply explained

There are neither coins nor bills of Bitcoin. The cryptocurrency exists only virtually, as a digital string in a computer program. It was invented by a certain Satoshi Nakamoto in 2008 - although it is still not clear who is behind it. Bitcoin can be bought, stored, resold, sometimes used for payment. To purchase a bitcoin, you exchange euros. It's kind of like changing it into dollars for your vacation. However, all of this can only be done online.

2) Not a real currency

Currencies like the dollar are backed by a country and its economic power, and the central bank ensures that the value remains stable. With Bitcoin, there is no central authority overseeing everything. The price of bitcoin fluctuates a lot, and it's not certain that there will still be anything for it in ten years. Some people think it's just fine that Bitcoin is not state-organized. After all, there are states that prohibit their citizens from transferring money abroad. This is where the Bitcoin can help. However, some states are also thinking about banning this cryptocurrency.

3) Price fluctuates extremely

Some people believe that bitcoin can save them from inflation. The number of Bitcoins in circulation is capped at 21 million, with 18.95 million in circulation by the end of February 2022, according to Statista. There is no cap for euros or dollars. Inflation causes goods to become more expensive. A mid-range car then no longer costs 20,000 euros, but 21,000 euros - a price increase of 5 percent. The bitcoin price fluctuates even more. In April 2021, one Bitcoin was worth 60,000 dollars, in May 2022 it fell to 27,000 dollars. That is already a difference of more than 50 percent.

4) The bookings in the blockchain

All purchases, sales and payments with Bitcoin are stored in data blocks that are linked together in a chain. This is the blockchain (see glossary). There is a network of people who use their computers to make sure that everything is done properly. These are the miners. For their work, the mining, they receive new Bitcoins. Each participant has a copy of the blockchain stored on his or her computer. Counterfeiting is therefore virtually impossible.

5) Buy Bitcoins

To buy Bitcoin, you don't need to become part of the network. You just need to find someone who has Bitcoins and give them to you. It's similar to how cash payments work, only virtual. Someone opens their wallet, takes out a bill, and hands it over. With Bitcoins, you also need some kind of wallet. You can download those on the Internet. The wallets have a number. You have to give it when you want to buy Bitcoins. Unlike a bank transfer, there are no banks involved. The network checks and posts the Bitcoin purchase.

6) Marketplaces for Bitcoin

The wallet is only one way to get Bitcoins, there are other ways. You can register on platforms, exchanges, apps or other marketplaces - with your full name. So that providers know who they are dealing with, you have to connect via video and show your ID, for example. Or you have to show a bank account - and you can't open that anonymously. Once registration is complete, you can buy Bitcoins - and, if you want, store them with the platform.

7) What risks lurk

You can get the wallets on the Internet, and the platforms are also only accessible online. You can access them via computer or with your cell phone. Be careful. There are not only reputable providers and platforms. It has also happened several times in the past that hackers have emptied wallets. Bitcoins have also been stolen from platforms. This security risk is in addition to the fluctuation risk of the Bitcoin. You can also bet on certificates that track the bitcoin price. Certificates are like bonds and are issued by banks.

8) FAQ