News - 7 things you need to know about Bitcoin

By Mike Hesp

7 things you need to know about Bitcoin

Bitcoin (BTC)

Bitcoin is becoming a well-known phenomenon in today's world. Yet many people don't know exactly what Bitcoin is and what you can do with it. Here are the things you need to know about Bitcoin as you dive into the crypto world.

1 Bitcoin is decentralized

Bitcoin has no central institution exercising control. Instead, the cryptocurrency is controlled by a network of participants. A consensus mechanism is used to ensure that everything is done right. This is Proof of Work mentioned.

2 Bitcoin is a blockchain

To simplify things, Bitcoin is often said to be based on blockchain technology. Strictly speaking, however, Bitcoin is a blockchain. In fact, BTC is the best-known application of that technology, which has become a buzzword in recent years.

3 Transactions are not anonymous

If you make transfers with BTC and send them through the blockchain, they are not anonymous. The cryptocurrency with the highest market capitalization is the worst possible choice for conducting illegal transactions. With a little knowledge, the right information and authority, transactions on the blockchain can be traced quite accurately. Especially if you bought your crypto from a centralized exchange. Transactions on the blockchain are easily traced on the blockexplorer.

4 Bitcoin needs a lot of energy

There is nothing to minimize: to keep the blockchain secure, the network needs a lot of energy. This is due to the Proof of Work consensus. The "miners" ensure that the network is secure by performing complicated computational tasks. Whether this is justified is something each investor must decide for themselves, as it is still a controversial topic with many pros and cons.

5 Supply is limited

The maximum supply of BTC is limited to 21 million units. These will be distributed gradually. Currently, most of the coins are already in circulation. At the time of writing, there are already 19.4 million BTC floating around on exchanges and wallets.

6 Bitcoin halving is imminent

The distribution of the remaining 1.6 million BTC is fixed in the code and will be halved every 100,000 new blockchain blocks, roughly every four years. The Bitcoin halving is a reward miners get for keeping the blockchain safe will be cut in half over the next year from 6.25 to 3.125 bitcoin per block.

7 Supply pressure increases

In the past, halving has regularly led to Bitcoin price increases. This is because rising demand meets steadily shrinking supply. Whether this will happen again in the coming years depends mostly on Bitcoin adoption.

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