Bitcoins: how they work and what they are

Facebook
Twitter
LinkedIn

Today more and more people are wondering what bitcoins are and how they work. Something that comes naturally and naturally, as it is one of the most innovative investment formulas as a result of the innovations put forth by digital technology.

In fact, the Digital Revolution has led to unprecedented change within everyday habits, even bringing out new opportunities. In this sense, knowing how bitcoin works represents something extremely useful. Let's find out together why.

Bitcoin: what is it?

When we talk about bitcoin we mean. the first currency that was made as a result of the development of a specific and particular technology: the blockchain. Its distinctive feature is in the fact that it turns out to be a currency that has no physical correspondent but can only be used in the online circuit. This is because it transcends the borders of individual states and is deployable within a transnational and much broader scope.

But what does bitcoin mean? The term reflects well, etymologically, what this digital currency, used within the world wide web by more than a million users for purchases of real or virtual goods, actually is. The word, of English origin, is composed of bit and coin: the respective anglophone of currency.

Bitcoin was first introduced on a conceptual level by Satoshi Nakamoto, a pseudonym behind which, after more than 10 years, it is still unclear who exactly is behind it. There are several speculations and it has been concluded that it is One or more hackers/experts in high finance. An identity that has provoked no small amount of rambling and periodically returns to the headlines of newspapers, including the more established Italian ones.

We do, however, have elements that are certain and that tell well, as there is unequivocal historical data to support them, something more than, again speaking of bitcoins, a possible explanation of their origins.

According to the facts, in the 2009 first bitcoin valuation takes place, year in which it is dated according to an exchange rate of 1309.03 to one dollar. We have to wait one more year to wait for the first exchange: it's in 2010 That this occurs, when two pizzas are delivered for 10,000 bitcoins. When one considers the current value, those who carried out this transaction certainly achieved an unprecedented bargain!

How bitcoins work

Bitcoin is not the only virtual currency or cryptocurrency present, despite being the most popular and traded. Other popular and valued cryptocurrencies include Ethereum and Litecoin, to give examples.

With respect to the question on the how bitcoins work it is interesting to know that those currently available on the network are around the 21 million, although the number actually in circulation amounts to about 9 million. The value of the first transaction was zero, while today it is more than 21,000.

Throughout its history the highest quotation recorded by bitcoin is over 59,000 euros, while the lowest price amounted to 51.30 euros. According to the Financial Times, the total trades managed to reach a record and unprecedented amount, touching $10 billion.

To use bitcoins, according to the Italian stock exchange, it is essential to open a virtual account/portfolio and then connect to sites that offer an exchange between money and virtual currency; payment is achieved through wire transfers and reloadable cards. They can be obtained either through exchange platforms, which allow for the exchange of bitcoin and euros, or by trading CFDs.

Bitcoins can be both traded and spent, being accepted by multiple businesses, commercial as well as virtual and physical. It is a trend that seems to know no setbacks and is convincing, being perceived as reliable, especially following the more uncertain and delicate economic situation of recent years than ever before.

Bitcoin: advantages

Bitcoin has multiple advantages, starting with the fact that results totally autonomous and independent, particularly by governments, banks and corporations, with no authority to support it or interfere with it. It is, in essence, about a decentralized type of currency, designed so that no person or machine can take control of it and thus, consequently, capable of always being able to circulate.

The other elements that make this virtual currency so attractive are as follows:

  • Bitcoins are totally transparent. Every transaction is stored within the Blockchain, from the beginning of its creation to the present and even into the future. None of these can be changed since it is a public ledger: as such, possible attempts at tampering can be noticed, monitored and corrected by anyone.
  • Total control by users. No person who owns bitcoins can witness their withdrawal without explicit consent from the owner-something that occurs at all stages in which bitcoin is placed.
  • Thanks to blockchain, bitcoin poses no risk of counterfeiting. The details of people in possession of bitcoins are handled with respect to privacy, this is because they cannot be traced back to any personal information. Is this not confirmed by the same mystery that revolves with respect to the figure of Satoshi Nakamoto?
  • Transactions that occur instantaneously, beyond geographical distance. Only a few minutes are required, with short timelines at an unparalleled level.
  • Simplicity in portability. Being 100% digital, bitcoin is a currency that is characterized by the fact that it is highly portable, that is, easy to carry. A factor that positively affects the transparency of transactions and possible counterfeiting.

Finally, bitcoin can be easily converted to most currencies in the world. No less international and cosmopolitan is its use, which is also of planetary significance.

Bitcoin: disadvantages

Bitcoin presents Disadvantages that should be linked to its recent introduction. Let's start with one aspect that should not be underestimated: the legal one. It differs from country to country, which is why it is essential to know it according to your state of reference. Italy has ad hoc regulations whose knowledge is essential at the fiscal level, as well as at the regulatory level.

The European Union has been working on this for years already, in an attempt to give a single vision within the member states, so as to create a unified and shared point of view: we discuss this in more detail in the next section.

Returning to the other disadvantages bitcoin has, it is important to keep in mind the fragility of its evaluation which, while seeing a not unremarkable trend, has also seen significant ups and downs, as confirmed by the history of the cryptocurrency itself. Understanding when to buy and when to sell is something that requires analytical skills, insight, a kind of special wisdom, in the workings of bitcoin.

An element that depends, and not a little, on the Choice of reliable and capable operators, whose reputation is required to be immaculate over time. Not only that. The fact that this is something so new and decentralized seems to verge toward management that sees constant and increased regulation.

It is a challenge for state governments to integrate bitcoin within economies. These are increasingly local and international together given the characteristics of the virtual currency and the global context in which it is embedded. The risk is that of a loss of the decentralization factor-the hallmark and strength of bitcoin.

To summarize, we can say that the factor to the disadvantage of bitcoin is one, namely its young age. Its recent introduction makes its mechanisms yet to be discovered and tested.

What does the EU say?

The European Union has repeatedly taken a position with respect to bitcoin and cryptocurrencies. In particular, it recently reached a Regulatory agreement having the objective of protecting investors while preserving financial stability, while at the same time allowing innovation and development of a sector such as virtual currencies, which has been present for several years and is constantly on the rise.

The EU clarification process with respect to cryptocurrencies is still ongoing today, as there are disparities at the legislative level within states: some already have measures in place, others do not.

The agreement signed recently by the European Parliament and the EU Council Presidency. provides:

  • Risk protection regarding bitcoin consumers.
  • Update of measures in terms of combating money laundering.
  • The EU Commission is to provide a report with respect to the actual environmental impact of bitcoin.
  • Need for cryptocurrency providers, including bitcoin, to be licensed to operate within the borders of the European Union.
  • An evaluation of specific measures for NFTs is being planned.

If you are wondering with respect to bitcoin in Italy and how it works, please be advised that the Belpaese was among the first to adopt national ad hoc legislation. Particularly crucial is the inclusion of virtual currency within the tax return. A measure required by law and in need of further study, since it has particular specificities depending on the value generated by the virtual currency.

Latest articles

crypto tax return
paypal launches stablecoin
crypto tax consultant
CRYPT&Co ONEPAGE_2esec.
digital smart contracts
cryptos what are they
what are bitcoins
Defi Crypto: what Decentralized Finance is like'is.
bitcoin loans
digital smart contracts

Get in touch

Write your email here and book an appointment

en_USEN