The most important in a nutshell
- Bitcoins are digital units of value that are intended to serve as a decentralized currency. They are only available as bits and bytes on storage media. In everyday life, you can only pay very rarely with Bitcoins.
- Behind Bitcoins is not a state or a central bank, but a worldwide data list, the so-called blockchain.
- Trading Bitcoins is highly speculative. The price has already doubled within weeks, but also halved again.
- There is no guarantee that you will be able to sell your Bitcoins at a profit in the future. They can also become completely worthless.
This is how you proceed
- Use a reputable platform to buy Bitcoin. We recommend Bison, Nuri and Bitvavo.
- Buy Bitcoins only if you understand the concept and know the risks – and only with money that you can bear to lose.
- Pay attention to the fees before buying and use a price limit if possible.
- Be careful: Scammers also try to earn money from the hype.
In 2009, the first Bitcoins in history were created – more precisely calculated, because the maximum possible 21 million Bitcoins exist only on computers, mobile phones and storage media. The fact that the amount of Bitcoin cannot grow arbitrarily and there is no central control option is an enormous advantage for friends of the cryptocurrency. Skeptics point to the sharp price fluctuations.
In the spring of 2022, a Bitcoin will cost as much as a mid-range car. You should not just let yourself be carried away by the hype about Bitcoins, but also know the risks. Very important: Bitcoins should not be at the center of your investment. How to use them as a supplement, you can read in this guide.What are Bitcoins?
Even the question of what a Bitcoin looks like shows that this system is something completely new. While we encounter euro coins or Girocards every day and we have a clear idea of other financial products such as a share or a gold bar, this is different with the digital sequence of numbers and letters. But even if hardly any article about Bitcoins can do without an imaginative illustration, these are pure symbolic images.
Literally translated, Bitcoins are coins that exist only on computers – i.e. only digitally. Synonymous with the digital coins, some also speak of the digital currency or Internet currency. The idea of Bitcoin: The owners can pay – regardless of state money.
In addition, Bitcoins also stand for a secure exchange system. The idea: Members of the network can transfer money to each other worldwide and check all transactions themselves – no bank is necessary for this. Even in retrospect, no one in the network should be able to manipulate transfers of Bitcoins.
At the heart of the technology is the so-called blockchain. It is the digital directory where all Bitcoin transactions are stored. All members of the network can verify transactions (peer-to-peer technology), and powerful computers embed them in a complex computing task. This makes fraud more difficult.
Bitcoins are also known as cryptocurrency. Cryptography, i.e. encryption technology, plays a decisive role in the creation of the blockchain. After all, the aim is to avoid something that usually happens with purely digital goods: that a copy is indistinguishable from the original and that “counterfeit money” floods the market.
It is unclear who had the idea for Bitcoin. Above the concept paper, which describes how the cryptocurrency works, is the name Satoshi Nakamoto. This is obviously a pseudonym, and so far the inventor or inventors have not spoken out with their real identity. In any case, the idea quickly met with interest, initially especially among users who wanted to be independent of states and central banks.
Meanwhile, there are also countless other crypto currencies. Some, such as Bitcoin Cash, are derived from Bitcoin, others, such as Ether (Ethereum), were developed separately. With a market share of around 39 percent of all crypto currencies, Bitcoin itself is still the best-known and most widespread (as of April 10, 2022). You can find out more about how the blockchain works exactly and how Bitcoins are created in the first place below.
The usual abbreviation, i.e. the ticker symbol for the Bitcoin, is BTC. XBT is sometimes used as another abbreviation. The latter follows the international ISO standard, according to which the beginning of a currency symbol must always correspond to a country code (as with EUR or USD) – but with Bitcoin no country can be defined, hence the X.
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Our tip: Stay up to date on the topic [category] – with our free newsletter! How much do Bitcoins cost?
The price of Bitcoins is based on supply and demand. Interest and demand have risen steadily in recent years, also due to the increasing coverage in the media. At the same time, the supply is limited because the Bitcoin network can only gradually produce new coins. You can read more about this below. A Brief History of Bitcoin
When the digital currency launched in 2009 and hardly anyone knew about it, supply and demand were low – the rate at that time was less than 1 US dollar. At that time, it was mainly the persuaders who wanted a currency that was independent of central banks and commercial banks who bought. Whoever of the first Bitcoin owners is still there, has a fortune in his digital wallet according to today’s status. The price has multiplied extremely over the years.
In 2017, investors also increasingly invested. They saw Bitcoins and the computer technology behind them as the next “hot thing” and thus drove up the price. On closer inspection, however, the price is by no means only on the way up. From the interim record level in December 2017 (16,600 euros), the Bitcoin crashed to below 3,000 euros and lost over 80 percent of its value at that time. At the end of 2020, the Bitcoin price again exceeded the threshold of 16,000 euros and reached a new all-time high in February 2021 when the 40,000 euro mark was exceeded.
At these scales, it is of course also possible to trade individual parts of an entire Bitcoin. A thousandth or 0.001 Bitcoin was worth between around 30 and 50 euros in recent months. The smallest defined subunit is called Satoshi and corresponds to one hundred millionth of a Bitcoin.
Since October 2020, US users of the payment service PayPal can buy and sell Bitcoins via their customer account (exception: Hawaii). However, a transfer to other accounts is currently not possible. At the same time, PayPal also expanded its offer to include the crypto currencies Ethereum, Litecoin and Bitcoin Cash. Since 2021, PayPal users from the USA can also make purchases with Bitcoins. PayPal then exchanges the digital balance for conventional money during a transaction, such as dollars (“Checkout with Crypto”). PayPal wants to offer a Bitcoin service in other countries as well. In the UK, a corresponding service was launched in the summer of 2021. It is not yet known when Germany belongs. Are Bitcoins a good investment?
The idea of Bitcoins may also be fascinating for you. Nevertheless, there are some good reasons why you should not use the digital coins as a focus of your investment or as a basis for private retirement provision, but at most as an admixture.
Bitcoins do not work as a means of payment – Neither the department store nor the tax office accept Bitcoins, most likely not your landlord either. But there are some online retailers and few shops, so you can pay for the food at Lieferando by Bitcoin. The Ukrainian government is accepting donations in Bitcoin and other cryptocurrencies to support the army and civilian population in the war against Russia. (Wikipedia parent Wikimedia, on the other hand, has not accepted donations in Bitcoin since spring 2022.) There can be no talk of widespread acceptance yet. Of course, this may change in the future.
Notable exceptions are El Salvador and the Central African Republic. Since September 2021, the Central American state has become the first country in the world to introduce Bitcoin as legal tender. Central Africa followed in April 2022.