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Bitcoin - the most popular digital currency at a glance.

The currency Bitcoin currently dominates media reports, is said to be interesting for investors and investors. However, very few people know exactly what is behind it. Yet the digital currency is on a full course for success; in Japan, it has even become official means of payment alongside the yen.

The digital money is also being accepted by more and more companies. The term is composed of the words "bit" for the smallest memory unit on the computer and "coin" for coin. But what exactly is it about, who is Bitcoin suitable for and how does it all work? We want to get to the bottom of these questions in the following.

Bitcoin - not real money

First of all, the Bitcoin is not real money. Even if there is talk of virtual money or internet money and these terms suggest that it could be money, this is not the case. The representation of Bitcoin on the Internet with a golden fantasy thaler also gives this impression. It quickly becomes clear why it is only a digital currency. After all, with Bitcoin you are holding neither real bills nor coins in your hand. Nor does the Internet money fulfill all the functions of classic money by any means.

Bitcoin is rather the result of a calculation principle in which actually everyone can participate. For this purpose, individual amounts are sent back and forth between user addresses during transactions. A secret key allows access to one's own address in the process.

Bitcoin is now being used more and more, but general acceptance is still quite low. That is why experts are still far from talking about real money in this context.

The value retention function of Bitcoin is equally controversial. The reason for this is that the prices fluctuate very strongly. For example, the currency can quickly lose $1,500 in value within just two weeks. Controversial discussions also arise around the question of whether Bitcoin is suitable as a unit of account. Although the Internet money can be divided at will, prices are only rarely quoted in Bitcoin.

How does Bitcoin actually work?

Bitcoin is based on a technology called blockchain. It is often equated with a digital bank statement. Several blocks are linked together, in which all Bitcoin transactions made so far are stored in encrypted form and can be viewed by the public.

The Bitcoin address itself says nothing about the user behind it. Nevertheless, Bitcoin payments are still not completely anonymous. The transactions can be traced accordingly. However, some services have been developed in the meantime to improve the anonymization of Bitcoin payments. The database is managed by several computers for this purpose. This makes it transparent and impossible to manipulate.

What the network does not need is the central intermediary to confirm the authenticity of the information. However, this potential of blockchain technology also makes Bitcoin very interesting. In the real financial industry, there is still a need for "gatekeepers", which can be dispensed with in Bitcoin. At the same time, the digital currency is independent of governments.

Paying with Bitcoin?

Bitcoin are, as mentioned at the beginning, no classic money. A salary payment in Bitcoin is therefore not possible. Instead, the internet money can be purchased on various online exchanges. For higher sums, however, the presentation of an ID card is required in order to comply with certain rules and laws. This is intended to ensure legally secure trading by the exchange and basic protection for investors.

Some companies now even accept Bitcoin as a means of payment. However, the prerequisite for this is the establishment of a so-called wallet, which is equivalent to a digital purse.

The number of companies that accept Bitcoin as a means of payment has been growing for several years. Internet stores in particular accept Bitcoin as a means of payment. Some restaurants, service providers, and even schools have also decided to let their services be paid with Bitcoin. To get an overview of the places that accept Bitcoin as a means of payment, corresponding lists on the Internet are suitable. However, they should always be treated with caution and usually do not claim to be complete.

According to the Internet platform BTC-Echo, for example, there are currently around 160 companies in Germany that accept Bitcoin as a means of payment.

Bitcoin have been writing success stories for years

The cryptocurrency Bitcoin has been writing a huge success story for years. For example, a programmer is said to have used Bitcoin for the first time as early as 2010. At that time, he is said to have bought two pizzas for 10,000 Bitcoin. These would be worth 40 million US dollars today.

The price of Bitcoin is rising steadily; in 2017 alone, a price increase of over 300 percent was registered. In some cases, the internet money has already scratched the 5,000 US dollar mark.

This rally in Bitcoin prices is often justified by Japan, where the currency has been permitted as an official means of payment alongside the yen since the beginning of April 2017. Likewise, Sydney is currently discussing whether to allow the internet money as a means of payment, according to Australian media.

The price of Bitcoin is additionally driven by the currency crises, the general political uncertainties, the hope for further price gains and the increased interest of institutional investors in the digital currency.

Another reason for the massive increase in value is that Bitcoin are limited. They are rare, just like gold, because it has been set that no more than 21 million Bitcoin can be created. That's why many people are already investing in the Internet currency, hoping to buy something with it later.

Is the Bitcoin bubble about to burst?

However, almost every day there are also warnings of a crash of virtual currencies. Most people draw a comparison with the dotcom bubble, which was also subject to very strong expectations. Even the Bundesbank called on investors to be cautious several times in May and described Internet money as pure speculation.

Dirk Schrade from the Bundesbank also states his concerns about Bitcoin. After all, the massive price increase in recent years cannot be explained by classic fundamentals alone. There is no intrinsic value of Bitcoin, you cannot make products out of it, such as jewelry made of gold.

Nor can you hang Bitcoin around your neck like jewelry, Schrade continued. Only the exchange value is given with Bitcoin. And this is not guaranteed, but is based on the hope that users of the digital currency will continue to accept this exchange value.

The proponents of digital money, of course, see it differently. They predict further price jumps for Bitcoin, in some cases even assuming prices of up to 50,000 US dollars per unit.

Some investors are not concerned with the money itself, but with the hope of further price increases and value gains. There are also Bitcoin users who assume that Internet money in general could achieve massive significance in the future.

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