Why should we concern ourselves with currency at all

What are bitcoins?

What the cryptocurrency is all about

[Updated on March 25, 2019]

What are bitcoins and why are we integrating such a currency at Outbank, one of the best banking apps in Germany? Why should we bother with another currency at all, euros are enough?

Jörg Platzer, Vice Chairman of the Bundesverband Bitcoins e.V., explained the importance of the Bitcoin currency using a clear example:

“With Bitcoin we have a financial system that is open to everyone. Nobody has to ask for permission anymore. You are thinking, for example, of 1 billion people in developing countries who have access to smartphones and computers, but not banking services. Someone in Uganda cannot open an online shop to sell his lambskin sandals because he has no way of receiving money from abroad. Maybe through the Western Union, but then only for a 20% fee. "

In the following blog post we will explain how Bitcoins can change these circumstances and how you can benefit from Bitcoins in your daily life.

1. What are bitcoins?

Bitcoin is a digital, cryptographic currency that is “created” and distributed in a decentralized manner and according to the open source principle via peers in the Bitcoin network. The Bitcoin price is currently at EUR 3,533.87 (as of March 25, 2019, 10:12 a.m.) per Bitcoin. Worldwide, 21 million Bitcoins can be put into circulation, to date there are 17,608,213 Bitcoins. Bitcoins are stored in online portals - a digital Bitcoin wallet. As with any physical money, Bitcoins can also be used in the online shop, in the café next door and in the supermarket - provided that the counterpart allows Bitcoin as a means of payment. We have now clarified the question “What are Bitcoins”, now the question is how they are created.

2. How are bitcoins created?

Bitcoins are created through a process called bitcoin mining. This process is carried out by Bitcoin users themselves. There is no organization that “leads” or dominates mining. Bitcoin users simply install a Bitcoin client on their own computers, which uses the computing power to mine Bitcoin, or log on to a mining pool platform. The most popular mining pool provider in Germany is called BitMinter, the most popular mining client is called Bitcoin-Qt and is an open source project.

The mining process itself consists of solving math problems. They are also known as hash in the Bitcoin environment. The mathematical problem always specifies the amount of the last transaction, the hash value of the last block and a random value as the initial value. The Bitcoin miner's task is then to try out as many random values ​​as possible until the combination of all three amounts results in the correct final value. If this succeeds, a so-called block is created. The higher the computing power, the faster the hashes and blocks can be created, as this increases the chances of quickly assigning the correct random value.

Since the initial value includes both the amount of the last transaction and the hash value, these transactions are validated and confirmed by the process of Bitcoin mining. Confirmed also means that the respective Bitcoin address is new and has not been used before. If the transaction is confirmed a total of six times, a block is complete. Each block contains the hash value of the previous block. This feature enables matching hashes to find each other and form a chain (blockchain) that is automatically validated by the matching hashes. This means that if an attempt is made to compromise a component of a block, the values ​​of all blocks change. The attack is immediately noticeable.

A total of 12.5 Bitcoins (currently EUR 44,173.38) can be generated per block. The miner receives this money plus transaction fees and can make it available for sale via various platforms. Originally 50 bitcoins could be generated per block. However, due to the limited number of Bitcoins, this number is halved every time 210,000 more Bitcoins are mined. If a miner tries to generate more than the currently prescribed 12.5 Bitcoins per block, his block will be rejected and cannot be attached to the blockchain.

3. How do you use bitcoins?

Let's assume you're in Berlin Kreuzberg and you feel like having a cup of coffee. But you don't have any cash with you. What to do? There are already a few coffee houses in Berlin where you can pay with Bitcoins. When paying you will receive a QR code that you can scan with your Bitcoin app on your phone. The billing address and the payment amount are stored in the code. The transaction is completed by clicking on the “Send” button. Where you can pay with Bitcoins in Germany, Die Welt and the Bitcoin-Kiez have combined.

4. What are the advantages of bitcoins?

  • Bitcoin is independent of politics and banking institutions, so it cannot be influenced by the normal financial market.
  • Bitcoin is limited to 21 million “coins”, and no expansion of this financial framework is permitted. Inflation is therefore excluded.
  • Bitcoins are based on open source. This code is continuously checked by Bitcoin users and thus made forgery-proof.
  • Bitcoin wallets are free, transaction fees are low and there are no switching costs.
  • Bitcoin transfers are validated within a few minutes as there is no bank as a "middleman".
  • Bitcoins are accessible worldwide to anyone with internet access.
  • Bitcoin transactions do not transmit any sensitive or personal data from the sender.

You can always ask us directly which options are available to you in Germany's best banking app with Bitcoins.

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Further information

Cryptography

is the science of encrypting information. If cryptography is used for the encryption and development of a currency, one speaks of crypto money or crypto currency - Bitcoin also falls under this category. Since money is particularly sensitive and sensitive data, a particularly strong encryption standard was developed for crypto currencies, the SHA-256, set. Bitcoin uses this standard and is therefore also traded as a particularly secure means of payment.

P2P network

stands for the peer-to-peer system of the bitcoin currency. P2P also makes the fundamental difference between Bitcoin and traditional currencies. No institution and no state is authorized to control and administer bitcoins. This happens absolutely independently between Bitcoin users. There are several digital marketplaces, file sharing platforms and wallets available. There, the individual users exchange ideas with each other and buy, sell or exchange their Bitcoins directly without any influence from third parties.

Open source

is a computer source code that is made available royalty-free and is therefore public and can be viewed by third parties.