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Bitcoin – simply explained – Stiftung Warentest




You should know that

  • Bitcoins only exist digitally. Unlike gold, for example, there is no real value. There is also no state behind it.
  • You can buy bitcoins, but you are not sure to get rid of them. Nobody has to accept bitcoins as a means of payment.
  • The Bitcoin price fluctuates extremely. You could lose all of your stake, so we do not recommend it.
  • There is no deposit insurance. Pay close attention to passwords and access data as well as the security of your computer. Otherwise the bitcoins may be stolen or you may no longer have access.
  • Bitcoins eat up energy. A single purchase currently costs about as much electricity as a two-person household consumes in six months.

More on the subject in our special Bitcoins: This is how the cryptocurrency works.

Money without bills

Bitcoin - simply explained

There are no coins or bills from Bitcoin. The cryptocurrency only exists virtually, as a digital string in a computer program. It was invented by a certain Satoshi Nakamoto in 2008 – although it has not yet been clarified who is behind it. Bitcoin can be bought, stored, sold again, and sometimes used to pay. To buy a bitcoin, exchange euros. This is similar to changing into dollars for your vacation. However, all of this can only be done online.

Not a real currency

Currencies like the dollar are backed by a country with its economic strength, the central bank ensures that the value remains stable. With Bitcoin there is no central point that monitors everything. The price of bitcoin fluctuates a lot, and it is not certain that there will be anything for it in ten years. Some people think it’s a good thing that Bitcoin is not organized by the state. There are also states that forbid their citizens to transfer money abroad. Bitcoin can help here. However, some states are also thinking about banning this crypto currency.

Price fluctuates extremely

Some people believe that the bitcoin can save them from inflation. The number of Bitcoins in circulation is limited to 21 million; according to Statista, 18.75 million were in circulation by the end of June. There is no upper limit for euros or dollars. Inflation makes goods more expensive. A mid-range car will then no longer cost 20,000 euros, but 21,000 euros – a price increase of 5 percent. Bitcoin price fluctuates even more. In April, a Bitcoin was worth $ 60,000, and by mid-June it had dropped to $ 30,000. That’s a 50 percent difference.

The bookings in the blockchain

All purchases, sales and payments with Bitcoin are stored in data blocks that are linked together in a chain. This is the blockchain (see glossary). There is a network of people who use their computers to make sure that everything goes well. These are the miners. For their work, the mining, they get new bitcoins. Each participant has a copy of the blockchain saved on their computer. Counterfeiting is therefore next to impossible.




Glossary: ​​important terms, clearly explained

Bitcoin.
The word is made up of the term for the smallest digital unit, the bit, and the English word for coin, coin.
Blockchain.
The blockchain is a digital chain of blocks. Chain means chain. Data records about payments with Bitcoin are stored in each block.
Cryptocurrency.
Bitcoin and other virtual currencies are also called cryptocurrencies. The Bitcoin payment system uses cryptographic methods to store the information it contains. Cryptography comes from the Greek and means secret writing.
Miner.
A miner is a participant in the Bitcoin network who checks payments and calculates new blocks.
Mining.
The English term mining means prospecting in German. When participants in the Bitcoin network, the miners, confirm payments, they receive new Bitcoins as a reward (see picture gallery). To add a new block to the blockchain, you need to transfer the information from the old blocks with the associated encryption to the new one. That costs computing power and an enormous amount of electricity.
Wallet.
The wallet is a digital wallet. Bitcoins are stored in it.

Buy bitcoins

You don’t have to be part of the network to buy Bitcoin. All you have to do is find someone who has bitcoins and gives you them. It works in a similar way to cash payments, only virtually. One of them opens his wallet, takes out a note and hands it over. With bitcoins, too, you need a kind of purse, a wallet. You can download it from the Internet. The wallets have a number. You have to specify this if you want to buy bitcoins. In contrast to a transfer, there are no banks involved. The network checks and records the Bitcoin purchase.

Means of payment for criminals

Anyone who is familiar with the Darknet – the “dark side” of the Internet – can buy bitcoins anonymously. This is why Bitcoin has always been so popular with criminals. They use the currency to trade drugs or weapons. Or they blackmail companies by crippling computer systems and demand the ransom in bitcoins. However, staying anonymous is not that easy. In many cases, you will need to identify yourself before you can exchange your euros for bitcoins. But even if you don’t – you usually leave traces on the network that can be traced.

Bitcoin marketplaces

The wallet is only one way to get Bitcoins, there are other ways as well. You can register on platforms, exchanges, apps or other marketplaces – with your full name. In order for providers to know who they are dealing with, you have to connect via video, for example, and show your ID. Or you have to show a bank account – and you cannot open it anonymously. Once registration is complete, you can buy bitcoins – and, if you want, have them stored on the platform.

What risks are lurking

You can get the wallets on the Internet, the platforms are only accessible online. You can access them on your computer or on your mobile phone. Be careful. There are not only reputable providers and platforms. It has also happened several times in the past that hackers emptied wallets. Bitcoins have also been stolen on platforms. This security risk is added to the fluctuation risk of bitcoin. You can also rely on certificates that track the Bitcoin price. Certificates are like bonds and are issued by banks.


Hasan Sheikh
Hasan, who loves technology and games, is studying Computer Engineering at Delhi JNU. He has been writing technology news since 2016.
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