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What is a Bitcoin?

With the cryptocurrency Bitcoin, transactions can be processed by governments and banks: They are transferred directly from one address to another. Every Bitcoin transaction is visible to everyone, for example on Blockchain.info. The website shows how many coins are currently being transferred from which Bitcoin address to which. Who is behind the respective address remains a secret. The transactions are encrypted - you can pay anonymously with Bitcoins. That's why they also have a bad reputation as a currency for criminals. The digital coins are also the currency of the Darknet, i.e. the anonymous part of the Internet.

How are bitcoins created?

Bitcoin is created through what is known as mining. The creation of a new unit of the cryptocurrency takes place via the virtual booking of transactions: If a user wants to send Bitcoins, this transfer process is bundled with other transactions to form a block. This must be validated and added to the so-called blockchain, a kind of cash book with which all transactions can be traced. This is done using a math puzzle that millions of so-called miners around the world are trying to solve. Whoever cracks the puzzle first receives a Bitcoin as a reward. In addition, the miners receive a kind of tip for checking transactions. The latter now make up the greater part of the miners' income, as programming makes it increasingly difficult to solve the arithmetic puzzles and the reward is also reduced.

What is mining

The creation of new bitcoins is called "mining". In order to win new coins, users provide the network with computing power. When a new block of transactions is created, miners verify them and convert the block to something shorter. A so-called hash is created - a sequence of letters and numbers. The code is kept in the currently last block of the chain, to which the following new blocks are in turn appended. Miners compete in the search for new blocks - if they are successful, they will get new bitcoins in return. Bitcoins are awarded proportionally depending on the contribution made by the computing power. Until the limit of 21 million coins is reached, the amount will be slower and slower, but steadily larger. Mining protects the blockchain from manipulation. For example, a Bitcoin cannot be spent twice.

What are miners?

This is the name of the operators who provide computing power for the blockchain worldwide. You confirm transactions and enter them in the blockchain. The miners receive bitcoins for their work - among other things from user fees.

How can you buy bitcoins?

Buying bitcoins is mainly done on different platforms. The best known in Germany is Bitcoin.de. You can also buy the digital currency on Bitcoin exchanges such as Cex.io or Kraken.com. Since the coins exist purely digitally, the owners need a so-called wallet, a kind of digital purse, in order to receive, store or send the virtual currency. A bank account or credit card is required for this. You don't have to buy a whole bitcoin either. Instead, you can also purchase partial amounts of Bitcoin. The smallest unit is a satoshi - that's 0.00000001 bitcoin. There are now some Bitcoin ATMs around the world where you can buy digital coins for cash.

What is a wallet?

A wallet is the digital purse that is saved with an app on the mobile phone or computer. Each user logs in with two cryptographically obscured keys: One is private, the other is used for identification in the blockchain. The Bitcoins can be managed in the wallet. In most models, however, the Bitcoin assets are held by an external provider. Although this carries the risk of a hack, it protects against loss of the digital coins.

Why is there Bitcoin Cash and Bitcoin Gold?

Bitcoin Cash was split off from Bitcoin on August 1, 2017. The background to this was a dispute over the speed of Bitcoin transactions. Only a limited number of transactions are possible at the same time. This means that there are long waiting times and / or high fees. An update called "Segwit2x" should make transactions faster by increasing the size of a block. That was not enough for a smaller group of miners. So you started Bitcoin Cash. Here the blocks are eight times the size of the original ones. Every Bitcoin owner got Bitcoin Cash for free.

The second split took place on October 25, 2017: Bitcoin Gold was branched off from Bitcoin. This process is called "hard fork". Bitcoin Gold should make it possible for private individuals to mine Bitcoin again. Bitcoin Gold went free to Bitcoin owners.

What is a hard fork?

Similar to a share split, a parallel currency can be split off with cryptocurrencies, for example to improve programming. The miners vote on it, the market decides which currency will prevail.

What cryptocurrencies are there?

The number of Bitcoins that can be given is limited. But not the number of cryptocurrencies per se. In the past few years, the number of cryptocurrencies has grown rapidly. The best known include Bitcoin (BTC), Ether or Ethereum (ETH), Ripple (XRP), Bitcoin Cash (BCH / BCC), Dash (DASH), Litecoin (LTC), Monero (XMR), NEO (NEO).

What is ether

In addition to the decentralized currency ether, complex contracts can also be exchanged via the Ethereum platform, which could, for example, replace notary services.

What is Ripple?

At Ripple, the blockchain should function like a global bazaar where digital goods can be traded in real time. Banks use them to send and trade foreign currency.

What is litecoin?

The cryptocurrency is based on the same source code as Bitcoin, but it is characterized by faster transaction times and improved storage efficiency.

What is IOTA?

IOTA aims to simplify payments in the Internet of Things. The cryptocurrency is therefore designed for micropayments between two machines that also work offline.

What is Dash?

The cryptocurrency Dash works more efficiently than Bitcoin and offers higher anonymity because the transactions are not public. The system is constantly being developed.

What is NEM?

Similar to Ethereum, the Nem platform is used as a payment system and to create so-called smart assets. For example, it can be used as an encrypted messenger.

What is Monero?

The crypto currency Monero enables a very high level of anonymity, as the cash flows are not publicly visible. Monero is more divisible than Bitcoin, but it is also more memory-intensive.

What is an ICO?

The three letters ICO stand for "Initial Coin Offering", very similar to the IPO, the abbreviation for "Initial Public Offering". Companies also go public with an ICO, but one for cryptocurrencies. No shares or digital coins such as Bitcoin are issued, but so-called tokens. The revolutionary thing is that start-up investments are not just reserved for an exclusive group of venture capitalists. Anyone can enter any amount via a crypto account, without being tied to a regional exchange. The tokens create a secondary market for venture capital investments because they are tradable. Blockchain-based technology also has the potential to compete with the classic stock market

What is the blockchain?

The technology on which Bitcoin is based is called blockchain. Translated from English, this means something like "block chain" - in this case a chain of transaction blocks. The blockchain can be thought of as a chain of information about all Bitcoin transactions that have ever been made. A kind of digital bookkeeping, so to speak - a decentralized database in which every user has data with all information chains: everyone who belongs to the network has the same and complete information about all transactions. The blockchain works like a public land register for transactions between computers. The digital encryption technology can completely document the transfer of ownership of a monetary unit. When a new block of transactions is created, it is added to the chain. This is the point at which the so-called "miners" come into play.

What is the difference between cryptocurrencies and the euro / dollar / etc.?

There are no governments or central banks behind currencies like Bitcoin. The currency is only available digitally. The rate or the price of a bitcoin is determined solely by supply and demand. If in doubt there is no longer any demand for the crypto money, it could completely lose its value. If, on the other hand, demand increases, the price could also go up significantly.

What is halving?

Halving is a deflationary mechanism built into Bitcoin by the founder pseudonym Satoshi Nakamoto, which is supposed to artificially create scarcity and avoid inflation. It was planned that those who provide computing power to process transactions would be rewarded with Bitcoins. However, so that too many Bitcoins do not get into the system, the remuneration is halved at regular intervals. After the upcoming halving in May 2020, mining will only be rewarded with 6.25 Bitcoins (2009: 50 Bitcoins, most recently 12.5 Bitcoins). The supply of Bitcoins is artificially shortened, the goal is stable Bitcoin prices. A look at the first halving at the end of 2012 shows that expectations of this mechanism resulted in a price increase to over $ 180. Just a year later, the Bitcoin price hit its first high at around $ 1,130. The last halving took place in June 2016 and resulted in the largest price rally for Bitcoin to date.