What are Bitcoins?

What exactly is a Bitcoin? The Bitcoin electronic money system was born with the idea of decentralizing payments between users, eliminating the need for financial institutions in transactions. Although not without controversy, this solution has proven in practice that it is functional and valid for carrying out transactions and its adoption is growing worldwide. In this article we will explain what Bitcoin is, its origin, why it is a true technological/monetary revolution worldwide and what are each of the components that make Bitcoin work.

What are Bitcoins? Depending on who you ask, they will define it as a digital asset, since we have a digital good that we can dispose of. At the same time it is also digital money, since it does not exist in physical form and allows us to acquire goods, services and debt settlement. Finally, it can also be considered a token, since it is a representation of a fiat money value.

Technically, Bitcoin is an electronic currency, a protocol and software. The conjunction of these components allows for almost instantaneous peer-to-peer (P2P) transactions and, consequently, worldwide payments with low or even zero transaction processing costs.

Bitcoin operates under peer-to-peer technology to avoid relying on a central monetary authority to issue and control money. Thus, it is not possible to manipulate the value of bitcoins or create inflation by producing more currency. The network itself manages the transactions and the issuance of bitcoins, which are generated through mining, in a controlled and decentralized manner.

The use of cryptography guarantees the security of transactions. For example, it is possible to control that only the owner of the coins can spend them, and that they can only be used in a single transaction. The figures of control and supervision present in the monetary systems of current markets do not exist in bitcoin. Bitcoin has the ability to subdivide to eight decimal places. In this way, one unit (1 bitcoin) can be divided into up to 100,000,000 smaller units. These units are called “satoshis”, which is equivalent to 0.00000001 BTC.