Bitcoin

Bitcoin is a cryptocurrency based on blockchain technology. It was created in 2009. The goal was to create a means of payment without central control, in which the transparency of transactions was ensured.

The description of the idea was published in a white paper under the name of a mystical pseudo-character, Satoshi Nakamoto. The identity of Satoshi, thus the identity of the inventor of the blockchain and bitcoin, is still unknown.

Bitcoin's promise is to create a transparent, unfalsifiable financial system. In addition, transaction costs become lower foreign exchange in the traditional banking ecosystem or in currencies issued by governments. The latter are also referred to as fiat money.

In contrast to money controlled by traditional central banks, the system here is completely decentralized. Transactions are validation by computers participating in the online network, so-called "mining". (In practice, mining means that the operators of the computers and server parks that provide the enormous computing capacity necessary for the continuous maintenance of the transaction ledger and transactions receive 1 bitcoin each as a reward after a certain level of performance.) The operation of other cryptocurrency that have been born since then is similar to bitcoin.

Through blockchain technology, the balance of bitcoin wallets is stored in a public ledger. Everyone has transparent access to the ledger, but regardless of this, the owners of the wallets can remain anonymous. Bitcoin has no physical form and is not backed by a bank or government. You have no real collateral.

Originally, bitcoin was intended as a means of payment, but currently it functions much more as an investment instrument, it is referred to as "digital gold" in many places. More and more individual and, since 2020, institutional investor are also buying it, mainly to escape inflation.

Bitcoin can be easily bought and sold through in mobile applications. Price is extremely volatile. This means that its exchange rate has very large swings. Its price movements typically move in a much wider range than those experienced in classic foreign exchange markets or stock markets. Intraday exchange rate movements of up to 30-50 percent are not unusual. 

An important feature of the algorithm is that the number of bitcoins is limited: a maximum of 21 million can exist. Today, a significant number of these pieces have been lost, and more and more are being bought up and kept by large investors, "whales". In principle, the last bitcoin will be mined in 2140. The condition for this is the followed practice, that the frequency of rewards for mining is halved every four years. This also follows from the algorithm.

Investing in bitcoin is fraught with crazy risks due to the exchange rate, which produces enormous movements. However, this is just one of the reasons why bitcoin and other cryptocurrencies that have entered the market in the past year have received a lot of criticism. 

Another reason is that this monetary system is much more polluting than the traditional one. For mining, high-performance computers and video cards are used worldwide. Their energy requirements are enormous, although there are now initiatives that would reduce this.