In today's video we are going to deal with a topic that many of you have wished for. Namely the topic Bitcoin. We will look at what bitcoins are, how they work, what the technical implementation looks like, what the advantages and disadvantages of bitcoins are and finally we will look at whether it is worth investing in bitcoins or not. Have fun with this video. Hi, my name is Thomas from Finanzfluss and today we will deal with the topic of Bitcoin. In the last few years and especially in the past few months, you could hear a lot about Bitcoin or crypto currencies. In addition , there are now many other crypto currencies such as Ethereum, Ripple or Dash. Today we will take a look at the mother of all crypto currencies, namely Bitcoin. So let's start directly with the question: What is Bitcoin anyway. Even if Bitcoin has been in the media in the last two to three years, the concept is much older. In 2008, the first concept paper by the founder of Bitcoin, Satoshi Nakamoto, was published. The real founder is not known to this day, since this name is a pseudonym that the founder used on various forums.
However, his true identity is not known. The Bitcoin is a digital monetary unit in a worldwide decentralized payment system. Since it is a monetary unit, you can pay with Bitcoin. This means bitcoins can be transferred from one person to another. The whole thing happens peer-to-peer from person to person without banks or other financial intermediaries standing in the way, as is the case in our classic payment system with euros, dollars, British pounds, and this brings us straight to the properties and how bitcoin works. Bitcoins are stored in so-called wallets. These are digital wallets that you can either have on your smartphone or download onto your PC.
Unlike the classic money system where your money is managed in a bank in a current account, these wallets belong to you. This means they are also stored on your PC or smartphone, which means that nobody can block these wallets. For example, your checking account can be blocked by the bank or a government, which is not the case with a wallet.
There are also other restrictions that your bank may impose on you, for example for security reasons , such as transfer limits, maximum amount of transactions. All of these restrictions do not exist with the Bitcoin wallet, since you are the master of this wallet yourself. Another point regarding the restriction also applies to the geographical restriction. For example, while it is difficult or very expensive to transfer money to the other side of the world, say to Africa or Australia, for example , Bitcoin is not a problem.
You can access your wallet from anywhere in the world if you have an internet connection there and also transfer money to any wallet anywhere in the world . The programming code of the
Bitcoin protocol is open source. This means everyone can look at it for free and form their own opinion on how Bitcoin works and whether it is a safe technology in their eyes. Of course, a certain technical understanding is required here. In this open source protocol you can also read that the number of bitcoins in the whole world is limited to 21 million.
In the next step we will look at how these bitcoins are created. However, this development process is capped at 21 million. In this respect , bitcoin differs from classic so-called fiat currencies such as the euro, the US dollar or the Japanese yen. This can be printed arbitrarily by central banks and there is no upper limit. As I said, it is different with Bitcoin.
Let's now turn to the technical implementation in order to understand exactly how such transactions take place from one Bitcoin owner to another and how Bitcoins are created. First of all, we have to look at the so-called miners, who are responsible for the creation of bitcoins and also for the validation of transactions. Miners are members of the decentralized network. You are responsible for validating transactions in Bitcoins. This means confirming that a Bitcoin transaction from wallet A to wallet B actually took place. Different bitcoin transactions all over the world accumulate in different blocks. Hence the term blockchain. In order to ensure the security of this transaction, which is now in the blocks , these blocks in quotes must be cracked.
To do this, very complicated arithmetic tasks have to be solved in order to virtually decode this block. Only when the block is cracked are these transactions released and the money has actually been transferred from person A to person B. The task of cracking these blocks is now up to the miners. There are always many miners working at the same time to crack a block. However, only one person at a time manages to do this and he then receives a monetary reward for his work for the computing power that he makes available to the network. And this brings us to the process of creating bitcoins. From the 21 million bitcoins contained in the bitcoin protocol, a part is then quasi unfrozen and credited to him. So you can see that this decentralized network is run by the miners, who then validate these transactions between bitcoin holders.
It is called decentralized because theoretically anyone can work as a Bitcoin miner and then make their computing power available to the entire network. As a reward, you get bitcoins every time you crack a block. Cracking these blocks becomes more and more difficult over time and the payout, i.e. the reward for the miners, becomes less and less until the 21 million are reached. However, the miners still have a possible second source of income, namely the so-called transaction fees. So they are not only dependent on cracking the blocks, but can also prefer to carry out transactions where you also give a small tip. Another technical aspect that we need to discuss are the so-called ledgers. It is the case that all transactions that have ever taken place in the Bitcoin network are stored.
These transactions are stored in the so-called ledger, which can roughly be translated into German as a payment book . All transactions are listed here with the amount and wallet number. This means that in this ledger we will see that person A with a certain wallet number has transferred an amount in Bitcoin to person B or his wallet number. All transactions can be traced in this ledger , but it is not known who made these transactions, since, as I said, only the wallet number is represented and it is not possible to trace who owns which wallet. When creating a wallet, you do not have to enter your name or address. Payment with Bitcoin is therefore just as anonymous as with cash. Although there are ways today to find out who owns which wallet, the basic idea of Bitcoin is st ll anonymous payme t. Finally, to the technical part, one must of course say that it is absolutely not easy to understand how the whole thing works with Bitcoin. We also had our difficulties there in working out the technical details and I hope that we were able to roughly depict the basic idea of the technical realization of Bitcoin in this video Now let's take a look at the pros and cons of bitcoin.
One of the advantages of bitcoin, which is why it was created, among other things, was that there are low transaction fees. This is still the case, especially for transnational transactions. For example, if you want to send money from one country to another in different currencies, it can be very expensive. With the help of bitcoins, the transaction costs can be extremely reduced. In addition, Bitcoin has the advantage that it can be used from anywhere in the world as soon as an internet connection is available. Then another advantage is of course the decentralization. This means that you are no longer dependent on a third party , but that the transaction actually takes place in the network and is also stored in the network.
The entire concept is based on transparency. This means that you can easily understand when which transaction took place and at what amount, and at the same time privacy is protected, since the Bitcoin wallets are known but it is not directly traceable to whom which wallet belongs and therefore it is not publicly known who has which transactions in how much and when. In addition, the payment with Bitcoins takes place without any restrictions, so you can transfer at any time no matter what amount and no matter to whom. Let's now come to the disadvantages of Bitcoins and they actually go hand in hand with these restrictions, which do not exist at the moment.
Especially in the early years of bitcoin, it had a somewhat dirty reputation, since it was mainly used on the so-called dark web and used for illegal transactions. For example, drugs were bought with it, people were trafficked and so on. The fact that it is not possible to trace who initiated a transaction has greatly facilitated cybercrime on the Internet . The topics of tax evasion and money laundering, which have also been made significantly easier by Bitcoin, also fall into the illegal area. Another disadvantage of bitcoin is that it has significant price fluctuations and this is mainly because there are a lot of speculators in the market. Therefore, it is not yet fully mature as a payment system . Another disadvantage is that storing Bitcoins can be very complicated and requires a certain technical understanding . In addition, the security of your own Bitcoin wallet is in your hands.
That means every Bitcoin user has to take care of the security of his wallet himself , encrypt it and keep it as safe as possible. Finally, it can also be said that not so many shops or service providers accept bitcoins. For this reason, it is not yet very mature as an everyday payment system. Finally, let's consider whether it makes sense to invest in such a technology as Bitcoin or in other crypto currencies. In theory this is relatively easy to do. Bitcoin is traded on so-called Bitcoin exchanges. This is where the exchange rate is set between a bitcoin and a fiat currency, such as the US dollar or the euro. You can then use this exchange to pay in euros, for example, and then have bitcoins transferred to your wallet . Not all exchanges meet high security standards or are reputable. The link to a reputable exchange where you can watch the whole thing can be found below in the video description.
In our opinion, investing in Bitcoins is not worthwhile as a long-term investment. It is of course a super interesting technology that can very well change entire industries. But there can also be technical difficulties, major hacks and the Bitcoin will no longer be worth anything in a few years. If you still want to rely on the technology, you can stock up on bitcoins via such bitcoin exchanges . But be aware that it is pure speculation and not long-term wealth accumulation. If you want to invest money in it, you should definitely do it with money that you don't need or if you lose it, that wouldn't be a problem.
As already mentioned, there are many speculators on the market and Bitcoin in particular is extremely volatile. This means that there can be extreme price jumps but also price falls. You should definitely be aware of this and keep your emotions under control. I hope you enjoyed this video about the cryptocurrency Bitcoin. I know it's not very easy to understand, so we welcome your questions. Write them to us in the comments below and if you want, we'll be happy to produce more videos on the topic of crypto currencies for you. Feel free to tell us what other questions you have about bitcoins, whether you would like to have presented other crypto currencies and yes, if you liked the video, then please like it and if you haven't subscribed to us yet, then do so.
We would be glad. Every week we produce new videos and tutorials on the topics: financial products, investments and investment strategies so that you can take control of your finances yourself. Thank you and see you next video..
