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What is Bitcoin and why is it important?

“Bitcoin will do to banks what email did to the postal industry.” Rick Falkvinge.

The Numbers Don't Lie: How Bitcoin Has Impacted the World and Where It's Headed

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Bitcoin is a cryptocurrency that can be used to buy any good or service wherever it is accepted. It is a free and decentralized digital currency that allows transactions to be carried out without the need for intermediaries. It uses a peer-to-peer technology, which reduces the transaction to the parties involved who send and receive Bitcoins through a digital purse or wallet that has a Bitcoin address, similar to a bank account but free of any type of control or bureaucracy. . The miners are responsible for confirming these transactions through the "Proof of Work".

The creator of Bitcoin, Satoshi Nakamoto, published the white paper on it in 2008. The first Bitcoin was created in 2009 by an unknown person with the alias Satoshi Nakamoto. In 2013, as more people started mining, other cryptocurrencies like Litecoin and Peercoin started to appear. As more people started mining, more powerful computers were needed to solve complex mathematical problems and solve these blocks of information known as "Hashes".

There are some key characteristics that make Bitcoin a unique currency, and its model has been replicated by other existing cryptocurrencies, although with some differences from this cryptocurrency:

  • The money supply is limited to 21 million tokens, which are reduced to 50% in the halvings that occur every four years, reducing the reward for miners. This means that there are only a certain number of Bitcoins in circulation. The number of coins is fixed and cannot be changed.

  • Validated transactions cannot be banned or censored. They are recorded on the blockchain in an open ledger and can be verified by anyone at any time.

  • It is created with an open source, which means that anyone can review it and suggest changes if they wish. This allows users to trust that they know what they are getting into when using Bitcoin because they can see exactly how it works.

  • It is accessible to all users in the world as long as they have access to Internet connectivity through their phones or computers; you do not need to identify yourself before using them! No ID or passport or social security number or anything like that is needed! You just need an email address.

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Bitcoin mining is the process by which transactions on the Bitcoin network are confirmed and added to the public ledger, known as the blockchain. Mining also serves to secure the network, as well as to confirm to the rest of the network that transactions have taken place.

The way to solve it is through a mathematical problem, which needs powerful computers to be able to solve it. Once confirmed, the transaction is added to the blocks of the blockchain.

This also serves to provide security to the network. Some nodes, called full nodes, are a kind of software "station" that stores a copy of the blockchain, where all transactions are recorded, and these are only validated when they appear in each of these copies, which guarantees their legitimacy. .

The Bitcoin cryptocurrency is a breakthrough in electronic commerce. It allows users to send and receive money without the need for a bank, eliminating fees or commissions.

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To buy Bitcoins, you need a digital wallet or wallet to be able to transfer them from the Exchange user to your wallet through the public and private keys that it provides:

  1. Open a user in an Exchange that allows cryptocurrency transactions.

  2. Connect your wallet to it.

  3. Buy Bitcoins and transfer them to your wallet or leave them inside the Exchange user.

With these simple steps you will have access to your Bitcoins from any mobile device or computer using them anywhere in the world. However, not everything is as it is shown in the market or the voices of the experts.

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The cryptocurrency market shakes

Since last May 4, bitcoin has lost 32% of its value, and has only moderated the fall suffered by the collapse of the TerraUSD cryptocurrency.

This impending drop was almost 6% in early Thursday morning, reaching $26,755. However, by midday it had dropped 3.3% to $27,461, according to market data.

Even so, bitcoin is not the only digital currency to suffer falls. Ethereum, which is the second most used cryptocurrency, has plummeted at the opening of this day by 16% to $1,916.58. This midday it has recovered, losing just over 7%. However, in one year the losses have amounted to about 49%.

The recent drop in the price of cryptocurrencies is not the first time that Bitcoin has fallen back. We've seen it go down before, in 2008, 2011, 2013, 2018... and each time it's reached new heights.

So while it may seem counterintuitive to buy in a falling market, it's important to remember that it's not an unprecedented phenomenon. One of the classic investment strategies is to buy when there is “blood on the streets” (or, in this case, tears in your eyes because you are watching your cryptocurrency crash).

This strategy can be paraphrased with the old adage: "It rains and it clears." We don't know when the floodwaters will start or stop and we don't know when or if cryptocurrencies will rise again, but we do know they have done it before and they will do it again.

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If you want to invest in cryptocurrencies, it is important to understand long-term market trends. Since 2008, we have already seen that prices that were not in mind have reached very high levels. But at some point the typical fluctuation will return and the rush and illusions of a sudden profit can lead to serious errors in the calculation of the capital to invest.

Of course, if you want to take advantage of the fall in cryptocurrencies and buy Bitcoin during its decline, you have to study the set of economic indicators, historical data and long-term market projections for opportunities to arise. These can be increasing our positions in the same token or diversifying our portfolio with other crypto assets. They could also mean converting some of them into more stable assets like gold or silver coins.

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