The Briefing

What are Bitcoins anyway?

There are now over 10,000 cryptocurrencies — let's start with Bitcoin!

July 22, 2021
Reading time 2 min.

🌈 A quick taster for you:

  • A bitcoin is a digital monetary unit and a type of cryptocurrency.
  • Just like stocks, bitcoins are tradable and rise or fall in value.
  • Bitcoins are not dependent on banks or states.

🧐 Why do I care?

The buzzwords Bitcoin and cryptocurrency are constantly flying around the web. But what is it anyway? How much is a bitcoin worth? And where can you use it? We're here to tell you all you need to know.

🔍 What exactly is happening here?

  • The Basics
    A bitcoin is a digital monetary unit and a type of cryptocurrency. The name is made up of ‘bit’ — which is the word for the smallest digital unit — and ‘coin’, which we all recognise as a form of money. Bitcoins only exist digitally, and are stored in a ‘wallet’ on your smartphone or computer. Bitcoins are organized in a decentralized manner instead of via banks or states as is the case with traditional currencies. People all over the world can use Bitcoin to transfer money directly to one another. Each transaction goes through the blockchain, which is a type of computer network that embeds the exchange of bitcoins into very complex computing tasks to ensure that the transaction is secure.
  • Advantages of Bitcoin
    Some of the advantages of bitcoins are that they can be used worldwide, the fees of transactions are quite low, and the transactions are anonymous. This is exactly why bitcoins were loved by criminals in the darknet, especially in the early days. Today however, bitcoins are no longer a niche product, but have arrived in our everyday lives. The hype is understandable, but there are also some disadvantages to keep in mind. We’ve summarized the most important three for you.
  • Disadvantages of bitcoins
    A major disadvantage is that bitcoins have not yet arrived as a means of payment in everyday life. Only very few stores accept them. So you can't just go to the store or pay the rent with them.
    The first major disadvantage is that only very few stores accept bitcoins — so you probably can't use them in the corner shop or when paying your rent.
    The second disadvantage is that the price can fluctuate enormously, and is therefore anything but a safe investment. Many financial experts (even if they’re often old-fashioned boomers) still assume that the crypto bubble will one day burst.
    The third undeniable disadvantage of Bitcoin, and cryptocurrency in general, is that it has a massive carbon footprint. Bitcoin is backed by algorithms and the blockchain. In order for a bitcoin, or part of a bitcoin, to be guaranteed to belong to only one person, highly complex computing operations must be undertaken. And this requires huge amounts of electricity — in fact the amount of electricity used by Bitcoin dwarfs that of entire countries. And to make matters worse, the server farms are often located in countries that rely on coal or nuclear power.

🤓 What does this mean for me?

Bitcoins are traded on marketplaces on the internet. Like shares, the price is based on supply and demand. When the technology emerged in 2009, one bitcoin was worth less than 1 US dollar. Over the years there was a lot of hype, and one bitcoin is now traded for several thousand euros. Since many speculators are involved in the market, the price can fluctuate wildly — often by thousands of euros! Bitcoin reached its previous high on April 14, 2021 with a value of 64,748.91 US dollars. Whether Bitcoin is therefore suitable as a long-term investment, everyone must decide for themselves!

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