Bitcoin is an amazing thing and has solved many problems since its inception. It has helped people in third world countries who are not allowed to open bank accounts to still be part of the financial system.
In order for us to dig deeper into what Bitcoin is and how it works, we first need to understand what cryptocurrencies are and how they work. You can read about this in our first course which you can find here: Cryptocurrencies Rates
So, what is Bitcoin and how does it work?
Technically, Bitcoin is a digital asset. When it was created, it was assigned as a currency - a cryptocurrency that has the same value everywhere in the world.
With Bitcoin, it became possible to make transactions digitally between users without any centralised authority in between.
Because it is a cryptocurrency, it can be exchanged for other currencies. You can also use it to exchange it for goods and services if it is accepted as a payment method at the point of sale. It is becoming increasingly popular but is not yet available everywhere.
What is BTC?
Instead of writing Bitcoin, you write usually BTC as an abbreviation. This has been the case since its inception and it is also used as an abbreviation in financial trading. If e.g. to exchange Bitcoin against the Swedish krona, you choose the currency pair BTC/SEK.
Who founded BTC?
Bitcoin was created in 2009, but the creator of the cryptocurrency is still unclear. It's either a programmer or a group of programmers who go by the name of Satoshi Nakamoto.
There is a lot of speculation as to who is using the alias of Satoshi Nakamoto. One speculation has been in an Austrian man named Craig Wright. He claims that he is Satoshi Nakamoto, but to prove this, he first needs to make a transaction in the first bitcoin wallet, which is still untouched.
How does Bitcoin become money?
A BTC is created after a block has been excavated. This process is called mining and, as a miner, you receive a reward every time you mine a block. The legitimacy of these blocks is then verified by diggers on the blockchain, and so the process continues over and over again.
How does Bitcoin work as a currency?
Unlike a fiat currency, Bitcoin cannot be devalued. This is because a fiat currency does not have a limited supply. In Sweden, printing more and more fiat currencies while Bitcoin is limited to a maximum of 21,000,000 BTC..
At the time of writing there are just over 18,980,000 BTC which is about 90% of the maximum number. Every day about 900 BTC are created.
Is Bitcoin Legal in Sweden?
Under Swedish law, you can buyselling, exchanging and using Bitcoin in Sweden. The authorities have no problem whatsoever with Swedes using Bitcoin. The most important thing is that you pay tax as a Swede and declare for their BTC. However, it does not recognise Bitcoin as a currency when it is instead thought of as a security or financial instrument.
Is Bitcoin safe to use?
As with most things, there are risks associated with Bitcoin. It is promoted as a safe way to pay but is in fact no safer than any other payment method. There are even some who argue that it is less secure because it is decentralised and has no routine oversight from a centralised regulatory body.
You can read more about Bitcoin and its security by clicking here!
The Risks of Bitcoin
As an owner of Bitcoins, you have total control over your asset. This means you act as your own bank and a human error can mean you lose access to your cryptocurrency.
An example is if you lose your seed over your cryptocurrency wallet and your device breaks. Then it is not possible to restore your wallet.
Another risk of Bitcoin is the storage of your cryptocurrency on a third-party platform that turns out to be rogue or insecure. Since you are storing your assets in a company's wallet, it is possible for them to be exposed to cyber-attacks or similar.
This way you can lose your BTC.