What Is Bitcoin, and How Does It Work?

What Is Bitcoin, and How Does It Work?

From a groundbreaking idea to a globally acknowledged financial investment, cryptocurrency has undoubtedly come a long way. Today, Bitcoin (or “BTC”) is a proper household name, and it's hard to find anyone who hasn't heard of it.  

But while media outlets are picking BTC value apart, many surveys show that 98% of people have no basic understanding of the first digital currency, let alone the technology behind it. Crypto trading platform HitBTC knows all about it, and it's about time we explain the fundamentals.

What Is Bitcoin?

Bitcoin(BTC) is a digital currency created as a response to the obsolete financial system. You don't need a bank or other trusted party to process Bitcoin transactions like buying, selling, sending, or exchanging the coins. Instead, the record of every transaction goes into a distributed ledger, aka blockchain, which is visible to anyone. Transactions recorded in the blockchain are irreversible and impossible to falsify, and copies of the blockchain transaction ledger exist on numerous servers worldwide.

Satoshi Nakamoto is the mysterious mastermind behind Bitcoin. His vision paved the way for thousands of other digital coins and tokens, piecing together the modern crypto market.

BTC is exceptionally volatile, a quality that quickly gained the attention of traders and investors. And since Bitcoin's creator limited the currency's supply to 21 million, many assume the price will keep on rising.

How Does Bitcoin Work?

Blockchain is Bitcoin's underlying technology. It is technically a database that consists of digital blocks of information. All the essential transaction details, such as value, date, sender, receiver, and unique ID, make their way to blocks linked with each other in a chain.

Blockchain's transaction data is publicly available and is constantly updated on all the servers that store it. Blockchain participants verify transactions' legitimacy, and the system cannot be easily tampered with.

Bitcoin miners are the ones who collect ongoing transactions and form blocks in exchange for BTC rewards. To gain the right to add a block, they must be the first to solve a complicated mathematical task. Back in the day, anyone with a regular PC could become a Bitcoin miner, but today it requires significant computing power. So if you're looking into investing, it's way more accessible to download the HitBTC App and buy the coin.

Here are three other facts about Bitcoin you need to know:

  • Bitcoin, as well as the majority of other crypto coins, is not anonymous.
  • Bitcoin is not as evil as it's often portrayed: only 0.15% of all crypto transactions are related to illicit activities.
  • As of now, a crypto exchange is one of the safest and easiest methods of buying Bitcoin.

Final Thoughts

Bitcoin price does not define it, as tech-powered assets are way more complex. So before you check Bitcoin's price today, pause for a while and think, what is it that you're after? While crypto trading is best for immediate profits, holding bitcoin for as long-term investment may produce significant profits in a long run. A combination of both strategies may work for some investors, as well. And if you're looking for the best crypto trading platform with an easy-to-use mobile app, we recommend giving HitBTC a try.

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Fees and Limits update

We have recently updated our Fees and Limits. For the latest updates, please visit the Fees and Limits section on our website here.

HitBTC Mobile App

Don’t forget that you can trade on our platform from your mobile device. Start today by downloading the HitBTC App on Android and iOS.