What is Bitcoin: Simply explanation

 Bitcoin is supposed to get you rich - but how does virtual money work? We explain it. But we cannot promise you that you will get rich.

You should know that

  • Bitcoins only exist digitally. Unlike gold, for example, there is no real value. There is also no state behind it.
  • You can buy bitcoins, but you are not sure to get rid of them. Nobody has to accept bitcoins as a means of payment.
  • The Bitcoin price fluctuates extremely. You could lose all of your stakes, so we do not recommend it.
  • There is no deposit insurance. Pay close attention to passwords and access data as well as the security of your computer. Otherwise, the bitcoins may be stolen or you may no longer have access.
  • Bitcoins eat up energy. A single purchase currently costs about as much electricity as a two-person household consumes in six months.

More on the subject in our special Bitcoins: This is how cryptocurrency works.

    Money without bills

    There are no coins or bills from Bitcoin. The cryptocurrency only exists virtually, as a digital string in a computer program. It was invented by a certain Satoshi Nakamoto in 2008 - although it has not yet been clarified who is behind it. Bitcoin can be bought, stored, sold again, and sometimes used to pay. To buy a bitcoin, exchange euros. This is similar to changing into dollars for your vacation. However, all of this can only be done online.

    Not a real currency

    Currencies like the dollar are backed by a country with its economic strength, the central bank ensures that the value remains stable. With Bitcoin, there is no central point that monitors everything. The price of bitcoin fluctuates a lot and it is not certain that there will be anything for it in ten years. Some people think it's a good thing that Bitcoin is not organized by the state. There are also countries that forbid their citizens to transfer money abroad. Bitcoin can help here. However, some countries are also thinking about banning this cryptocurrency.

    Price fluctuates extremely

    Some people believe that bitcoin can save them from inflation. The number of Bitcoins in circulation is limited to 21 million; according to Statista, 18.75 million were in circulation by the end of June. There is no upper limit for euros or dollars. Inflation makes goods more expensive. A mid-range car will then no longer cost 20,000 euros, but 21,000 euros - a price increase of 5 percent. The Bitcoin price fluctuates even more. In April, a Bitcoin was worth $ 60,000, and by mid-June, it had dropped to $ 30,000. That's a 50 percent difference.

    The bookings in the blockchain

    All purchases, sales, and payments with Bitcoin are stored in data blocks that are linked in a chain. This is the blockchain. There is a network of people who use their computers to make sure that everything goes well. These are the miners. For their work, the mining, they get new bitcoins. Each participant has a copy of the blockchain saved on their computer. Counterfeiting is therefore next to impossible.

    Buy bitcoins

    You don't have to be part of the network to buy Bitcoin. All you have to do is find someone who has bitcoins and will give you them. It works in a similar way to cash payments, only virtually. One of them opens his wallet, takes out a note, and hands it over. With bitcoins, too, you need a kind of purse, a wallet. You can download it from the Internet. The wallets have a number. You have to specify this if you want to buy bitcoins. In contrast to a transfer, there are no banks involved. The network checks and records the Bitcoin purchase.

    Means of payment for criminals

    Anyone who is familiar with the Darknet - the "dark side" of the Internet - can buy bitcoins anonymously. This is why Bitcoin has always been so popular with criminals. They use the currency to trade drugs or weapons. Or they blackmail companies by crippling computer systems and demand the ransom in bitcoins. However, staying anonymous is not that easy. In many cases, you will need to identify yourself before you can exchange your euros for bitcoins. But even if you don't - you usually leave traces on the network that can be traced.

    Bitcoin marketplaces

    The wallet is just one way of getting bitcoins, there are other ways too. 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, for example, and show your ID. Or you have to show a bank account - and you cannot open it anonymously. Once registration is complete, you can buy bitcoins - and, if you want, have them stored on the platform.

    What risks are lurking

    The wallets are available on the Internet, the platforms can only be accessed online. You can access them on your computer or on your mobile phone. Be careful. There are not only reputable providers and platforms. It has also happened several times in the past that hackers emptied wallets. Bitcoins have also been stolen on platforms. This security risk is added to the fluctuation risk of bitcoin. You can also rely on certificates that track the Bitcoin price. Certificates are like bonds and are issued by banks.