What is Bitcoin and how does it work?

Know what Bitcoin is and how it works is important, especially for investing in this market. In general terms, Bitcoin is a decentralized digital cryptocurrency. Check it out below. 

What Bitcoin is and how it works 

What Bitcoin is and how it works is a common question among investors. In recent years the term has become popular on the market, as it is yet another form of investment available. 

Bitcoin was the first cryptocurrency introduced to the world. Launched in 2009, this asset was born alongside the blockchain system, which is responsible for storing all the transactions that take place between users. 

This currency works like traditional money, but there are some differences between them. The main difference concerns the decentralization of the model, i.e. no government, company or person is responsible for intermediating negotiations. 

What's more, unlike traditional currencies, Bitcoin only exists in the digital world. Although they are real, there is no physical version of the cryptos. Usually, people themselves are responsible for sending and receiving the cryptocurrencies. 

Another characteristic of Bitcoin is that it is a limited currency. In other words, the technology responsible for creating this currency allows only 21 million units of BTC to be issued. 

Cryptography is another term widely used in the world of cryptocurrencies. This technology acts as a layer of security which makes it more difficult for cybercriminals to act by making the information in these assets more complex. 

What is blockchain?

One of the key terms in the world of cryptocurrencies is the blockchain system. This technology makes it possible to track the sending and receiving of these assets. They are pieces of code generated virtually, which carry all the transaction information.

Although it was born alongside Bitcoin, blockchain is not just about that. This is because, as well as carrying bitcoin information, the system is also responsible for collecting data from other cryptocurrency transactions. 

What is the value of bitcoin?

Bitcoin, the best-known cryptocurrency in the investment world, suffers from market fluctuations. Moreover, its value follows the law of supply and demand. In other words, the more people want to invest in the asset, the more expensive it becomes, and vice versa.

Unlike traditional currencies, cryptocurrencies can fluctuate wildly over the course of a single day. There are various reasons for this, but the limitation of the currency and high demand are the main ones. 

Bitcoins are usually quoted in relation to the US dollar. In this sense, when this currency fluctuates on the market, there is an impact on the value of cryptocurrencies. 

What is altcoin? 

Altcoin is the name given to cryptocurrency alternatives on the market. In other words, any asset other than bitcoin can be considered an altcoin. Inspired by the creation of BTC itself, several cryptos have been launched on the market. 

There are currently thousands of digital currencies with their own characteristics. It's worth noting that some are almost identical copies of the original, with minor changes.

Others are available on complex and ambitious platforms, such as Ethereum, which promises to be more than just electronic money. In short, all cryptocurrencies are traded on the internet, without any third-party intervention. 

How to buy bitcoins

Now that you know what bitcoin is and how it works, you're probably wondering how to buy them. There are three ways to invest in these assets, be it BTC or other models. Check them out below:

• Acquiring cryptocurrencies from people who already own them;
• Mining bitcoins at a specialized broker;
• Accepting bitcoins as a form of payment in your business. 

The simplest and quickest way to buy bitcoins is undoubtedly through specialized brokers. In this case, to trade the assets, you need to open an account on the platform and add the amount to buy them. 

Bitcoins are safe

One of the main pillars of bitcoins is cryptography. This is a layer of online security that makes it difficult for cybercriminals to act, preventing any kind of fraud or scam between transactions. 

Because of this protection, bitcoins are considered safe. What can and has happened, however, is that digital wallets or brokers are stolen. 

What's more, because the cryptocurrency market has no regulations, it can be a problem. The Brazilian Central Bank itself has warned investors about these risks. 

There are more problems that can happen, such as server errors, loss of signature, hacker attacks and so on. This can lead to the loss of cryptocurrencies and, consequently, their financial value. 

Why investors are interested in bitcoins

The search for bitcoins is on the rise. In this sense, if you want to diversify your investment portfolio and are prepared for possible risks, it's worth getting to know the main characteristics of BTC. Check them out below:

Digital Gold

BTC is known as "digital gold". This is because the asset replicates the characteristics of gold itself. In addition to not being issued by any body or government, cryptos are low-transport and verifiable. 

Portfolio Diversification

Most investors consider bitcoins to be a great option for portfolio diversification. As long as the investor is willing to take risks due to the high volatility of the market, it is worth investing in cryptos. 

24 Hour Market

Another outstanding feature of cryptocurrencies is the market, which is available for transactions 24 hours a day. 

In this sense, anyone can buy or sell assets at any time and place in the world, either through a broker or an app. 

Affordable Investment

Last but not least, cryptocurrencies are an affordable type of investment. 

These assets can even be traded up to the eighth decimal place known as Satoshi. 

In this sense, investors and traders in this market are able to choose more options and the amounts they wish to invest.

What are the risks of cryptocurrencies?

Just like any type of investment, cryptocurrencies are not risk-free. 

In other words, before investing in these assets, it is important to know your investor profile and risk tolerance. 

There are three risks to cryptocurrency assets: Systems Risks, Usability Risks and Market Risks.