The Bitcoin in simple words | INCAE
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Bitcoin in simple words

February 02 2018
valentina wannabe

A few days ago I attended the talk of Roberto Ponce "Bitcoin and Cryptocurrencies",  at the Walter Kissling campus of INCAE. Ponce is a director of the investment banking firm Invermaster and an expert on the subject.

Before the talk, I only knew that Bitcoin is a digital currency, that it is currently worth thousands of dollars and that it is a pity that I did not invest in it years ago. I knew practically nothing and I would have liked to have a better context to understand all the topics exposed in the talk.

That is why it seems appropriate to start with the simplest thing so that those people who are not aware of the subject, can have a general understanding. This is a kind of guide for newbies:

Origin

Bitcoin is a decentralized digital currency. It is a currency because it has value, digital because it moves in the world of the internet, and decentralized because it is independent of the control of the government, the banks or another regulatory entity.

The first cryptocurrency was launched in 2009 and its creation is attributed to Satoshi Nakamoto, who is just a pseudonym of the true creator or creators behind bitcoin.

Nakamoto put together three things that already existed:

  1. Identity: adapt cryptographic algorithms to identify people or transactions.

  2. Information system- You decided to use a public database that anyone could access and review.

  3. Software platform: where it linked the transaction with the cryptographic signature, a time and a certain amount.

How It Works

Let's think about a transaction like the ones we do on a daily basis, if I want to transfer money to another account, I must do it through a bank that is in charge of the process. There is always a third party, but Bitcoin comes up with the idea of ​​eliminating these intermediaries.

It uses cryptography to verify that a user owns a certain account. There are two keys or keys; one public and one private, which are used to encrypt and decrypt information, guaranteeing security.

You can think of the public key as the number of a bank account and the private key as the secret PIN. The public key is used to receive bitcoins, and the private key is used to sign the transactions to spend those bitcoins.

Purses: Also called wallets or wallets, they store the private and public keys. There are wallets in the form of apps that are installed on personal devices or online accounts opened on platforms of companies that provide the service.

Blockchain (chain of blocks): it is an account book, a huge database where all transactions are recorded and transmitted to all nodes on the network. A node is a computer connected to the network that uses software to store and distribute an updated copy of the blockchain in real time.

Miners: They are the ones who review the account books to avoid cheating, process all the information and receive a payment of 12.5 bitcoins in return (more than $ 212.000 at the time this article was written). Miners can generate new bitcoins using special software to solve cryptographic problems.

This is roughly and without technicalities, what is Bitcoin and how it works. It is a complete financial revolution with the ability to transform the way the world interacts and buys; Undoubtedly its progress can generate great changes in the industrial and financial sector, we must be prepared!

To learn more about bitcoin you can enter here.

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