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What you need to know about bitcoins

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In recent years you have probably heard it often: the bitcoin. It was often reported on the news and thousands of people have become very rich (or very poor) because of it. If you have never studied bitcoin, it is probably all very vague for you. Still, it can be a very interesting topic that you can delve into. To get you started, I’ve outlined the basic information about bitcoins in this article here.

What exactly is bitcoin?

Developments in the field of internet and technology and the growing mistrust of banks after the financial crisis in 2008 led to an increase in demand for a new digital payment method. Bitcoin was the solution to this. Bitcoins are, to keep it simple, digital coins that you can use just like normal money. You can trade in them by buying and selling them, but you can also pay with them in various web shops. It is a so-called ‘cryptocurrency’.

Bitcoin’s value fluctuates enormously. In 2017, the bitcoin experienced an unprecedented rise and at one point the currency even had a value of almost 20,000 dollars. A lot of people talked about the coin this year, but a year later the hype faded and its value plummeted.

How to buy bitcoin

Everyone has the option to buy bitcoin. There are three ways to get bitcoins:

  • Via an online exchange office. Here you can easily pay the bitcoins in euros via, for example, iDEAL. However, a currency exchange is not the cheapest way to get bitcoins, as the companies behind these offices charge a certain percentage in commission to make a profit.
  • Through an exchange. Buyers and sellers come together at an exchange fair. Such a platform does not sell bitcoins itself, but makes it possible to exchange the currency for a payment. The costs here are a lot lower than with an exchange office, but it is a bit more complicated.
  • From another user. You can also buy bitcoins from other users. People offer their bitcoins through online marketplaces. It is more anonymous than the aforementioned options, but therefore often a bit more expensive.

How much is the bitcoin worth?

As mentioned earlier, the value of the bitcoin fluctuates enormously. Unlike regular stocks, bitcoin has no opening or closing price. The bitcoin exchange rate is established on international, online exchanges where the buyers and sellers trade in the currency. It’s a question of supply and demand. When the bitcoin price falls, the supply is greater than the demand and when the price rises, there is more demand than supply.

You can clearly see in figures that the value of the bitcoin differs so much. In the past 12 months, bitcoin was most expensive on June 27, 2019 (price of 11,426.17 $) and cheapest on February 15, 2019 (value of 3,177.63 euros). So there was a difference of more than eight thousand euros in between!

Where do you keep your bitcoins?

When you buy the digital coin, you naturally want to be able to store it somewhere safe. This can be done in a digital wallet, better known as a wallet. Such a wallet has a public and a private key. It is not a key as we know it, but is a kind of password; a series of dozens of letters and numbers that is very difficult to guess. The public key is a kind of letterbox: it is a digital address that people can send something to, only you can access it with your secret key.

There are five types of wallets, namely on your computer, on your smartphone / tablet, online, on certain hardware or on paper with QR codes.

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