Bitcoin guide for newbies

 Bitcoin for beginners

Although the history of Bitcoin is short (it emerged in 2009), a lot has happened since its launch. Its creation has always been surrounded by a certain halo of mystery, since it is not known who created it. Satoshi Nakamoto is just a pseudonym used by the person or people who gave birth to the project.

But still today, eight years after its creation, Bitcoin is not quite mainstream . Many have been surprised that the creators of the ransomware that affected Telefónica and other companies wanted to get paid in Bitcoin . We are going to explain everything about this coin.

Bitcoin, technology and economy

Bitcoin is a very curious technological idea . By combining computer networks, cryptography, and software, it is possible to create a fully distributed virtual currency, without the need for a central entity to issue and control it. Eight years later crypto is still resilient and Bitcoin usage has skyrocketed .

The economics behind this currency is the same as the economics behind any: scarcity and trust. That is to say, there is a solid basis for a Bitcoin to cost money, at least as solid as the one that sets gold prices .

And although Bitcoin was the first cryptocurrency, there are many others . It is true, Bitcoin is still the most popular, although lately others such as Ethereum are rising in value due to other value-added services they offer.

Bitcoin, how to get them

It is clear that if we want to obtain euros, all we have to do is work in a country whose currency is euros or go to a currency exchange office. But how do we manage to have Bitcoin? Of course not working, since it is not official currency in any country in the world.

The beginnings of any currency are complicated. There has to be an issuing bank, people have to trust and accept the currency and little by little it is put into circulation. On the other hand, with Bitcoin there is no issuer, the distributed computers that ensure that the transactions are correct obtain, from time to time, coins as a prize. This is called mining, and it is the way in which money is created with Bitcoin.

But before we put our computer to work to create money I have to say that mining is crazy right now. Those who make money with this technique have clusters of computers with dedicated graphics cards and in areas where electricity is cheap or even subsidized. Making money from mining is a thing of the past.

Then? Where do we get Bitcoin from? Well, like in the real world, in currency exchange houses. There are many on the Internet and they allow us to exchange normal money (euros, for example) for Bitcoins. Coinbase is a fairly popular exchange (and wallet, as we'll see later).

Bitcoin, how to store them

Now we come to the big question: how and where are Bitcoins stored? Well, cryptocurrencies like Bitcoin are completely virtual . To access them originally you had to use software. This software allows us to see the balance we have in our account and make and receive transfers.

The good thing about Bitcoin is that it is an open protocol, there are many software to manage our money. There is it for Windows, Linux, Mac, Android, iOS... I personally recommend taking it on mobile and within Android I like Android Wallet .

However, using software has a danger. If for any reason the device is damaged or deleted or formatted, we will lose all the money . Let's say that with Bitcoin the money is in "the Bitcoin cloud" (the so-called Blockchain ) and what the software stores is a copy of the key to access it. If we use software, it is convenient to make a backup copy of these keys.

Another option to keep track of our Bitcoin is to use a web wallet . In this way, a web page is responsible for saving our passwords and we will access our accounts with a username and password. Basically what these websites do is the function of a bank .

Coinbase is a good option for this, as it also allows you to buy and sell Bitcoins. The only bad thing is that if we use this method we lose part of the grace of having Bitcoins, using a completely decentralized system without relying on trust in any entity. No one can seize our money without stealing our keys. On the other hand, if we have the money on a website, we have to trust it.

Bitcoin, price fluctuations

Now it may seem that Bitcoin is very expensive, more than 2000 euros to change . And that is not a good time to invest in it. But in the past we have already seen similar moments, and the advice should be the same: be careful because it is quite a speculative asset .

Bitcoin has hit a lot of bumps along the way. The first was the closure of the Silk Road, an illegal exchange that the FBI shut down in 2013 . The transactions were made with Bitcoins and the price plummeted.

Just a year later, the world's largest Bitcoin exchange , MTGox, suffered an attack and 744,000 Bitcoins were stolen from its users. Soon it had to close . Again the price fell.

But Bitcoin was not a fad . And although he still has many challenges ahead , he has managed to overcome each setback. So you have to take it into account in the future, either as another asset or as a currency to pay.