All about BitCoin for newbies and everyone - Learn what is a BitCoin today

WHAT IS BITCOIN?

Bitcoin is an electronic money, operating without a central authority, which provides an innovative means of payment to its users. It is freely usable by everyone and offers unique features for businesses and individuals.

The advantages of Bitcoin

Bitcoin is both a currency and a payment system, and the most innovative way to exchange money cheaply.

Bitcoin is an international digital currency, allowing you to pay for purchases anywhere in the world, instantly and almost free of charge, without going through a bank, without giving your credit card details. It is an extremely reliable currency, used by millions of people.

Bitcoin is also an unprecedented decentralized system for managing the exchange of securities, in other words a monetary system without a bank and yet very reliable.

fast, economical and borderless

Payments are made in seconds, between neighbours or from one end of the connected world to the other. Transaction fees are less than 5 euro cents.

decentralized and controlled

Bitcoin does not belong to anything or anyone, it is a common tool, as is the Internet, which is managed collectively by its users. The money supply of bitcoins is strictly controlled, avoiding hyperinflation and other abuses of money creation.
secure and transparent

As soon as sent, your payment is tamper-proof. All Bitcoin transactions are recorded in a public database, Blockchain, whose data and code can be consulted by anyone.

A simpler way to pay than you might think

To pay in Bitcoin is to send a sum from one Bitcoin "address" to another address. The easiest way to use Bitcoin is to use a digital wallet, which will allow you to send and receive payments. These portfolios take care of almost everything: creating your Bitcoin address, managing your account, tracking your transactions. As simple as a mail...

To receive bitcoins, simply give your address to the payer, who will pay the bitcoins on it.
To send bitcoins, simply note (or scan) the address to pay and pour the bitcoins on it.

The correspondent receives the funds immediately, and a confirmation from the network then permanently records the transaction in the Bitcoin database.

Warning: once completed, a Bitcoin transaction cannot be cancelled under any circumstances.

Receive Bitcoins

In the world of Bitcoin, the concept of direct debits does not exist, there are only transfers. In order to receive a transfer - a transaction - a user will have to provide their public address to the correspondent who wishes to send them bitcoins. This public key is the alphanumeric address that identifies your account, much like a RIB identifies a bank account. It is the one that allows you to receive payments.

Example of public address: 1HBtfsNrKqsokZz9LyzX4Cu9fVXHVJJRbS8

The public address can also be represented by a QR code that can be easily scanned by a smartphone or webcam:

The communication of a public address does not pose any security problem: all a user can do is send bitcoins to the person who owns the address, and in no way take them from it. You will be able to securely put your public address in an email or on a website.

The public address is generated by the user's portfolio. Most modern portfolios, such as the Ledger Wallet, deliver a new address for every transaction, to guarantee users' privacy.

Send Bitcoins

Conversely, to send bitcoins, a user will have to ask the person who is to receive the funds for their public address. Once it is obtained, he can trigger a transaction from his electronic wallet for the amount of his choice.

Warning: once sent, a Bitcoin transaction cannot be cancelled by any means whatsoever.

Who accepts Bitcoins?

Online merchant websites

Today, more than 100,000 e-commerce sites worldwide accept Bitcoin. In France, the most important ones are Microsfot France and showroomprive. com. In the United States, DELL, Overstock or Newegg are the best-known players in this market.

By paying by bitcoins on a site, you do not take any hacking risks and never expose your private information such as your credit card number.

Physical stores

A growing number of physical stores are accepting payment in bitcoins, such as restaurants, clothing stores, or even dentists.

A world map of physical stores accepting Bitcoin is available at cornermap. org.

crowdfunding, micropayments, donations

NGOs such as the Red Cross or Greenpeace are now accepting donations of bitcoins, even for very small amounts. Websites allow you to give tips to reward an interesting article or comment.

New services are developing, made possible in particular by the extremely low commissions compared to other means of payment. Each Bitcoin transaction requires the payment of a commission of less than one euro cent.

Individuals

Going out to a restaurant with friends, letting someone pay with a credit card, and everyone reimburses them in bitcoins? That's possible. Paying for a purchase on Le Bon Coin in Bitcoins? Why not? Why not? Simply download a wallet on your smartphone to get started.

How is Bitcoin different from other payment methods?

At a time when more and more alternative payment services are emerging, the Bitcoin protocol has a few characteristics that make it unique, even in the face of modern, fast and secure payment methods.

Decentralization

To say that Bitcoin is decentralized means that no company, state or organization controls it. Like e-mail or the web, it is only a technology that everyone can use.

This implies in particular that it will never be able to change the conditions of use, since no company controls it. The only way to change the Bitcoin protocol is to build consensus among the community of its users, which will only accept amendments that improve the protocol.

Because the system is decentralized, it is impossible to attack any point to destroy it. The database containing the entirety of all Bitcoin transactions exists in tens of thousands of copies distributed around the world.

Open Source

Anyone can check the source code of the Bitcoin and detect errors or flaws. In this way, the protocol is collectively secured by the entire community. If problems are found, they are treated quickly and efficiently, not slipped under the carpet.

Any programmer can also propose modifications or changes to the protocol. They are then discussed publicly and potentially accepted by consensus.

Scarcity

The total number of bitcoins has been set at 21 million. This number is engraved in the protocol itself, and monetary creation in the world of Bitcoin is governed by an algorithm that increases the number of bitcoins in a regular and orderly manner. This process, by analogy with precious metals with which Bitcoin shares a significant number of commonalities, is called mining.

Bitcoins are traded on public platforms, with mechanisms close to trading rooms. The Bitcoin price is determined solely by supply and demand.

How does the Bitcoin work?

The Bitcoin protocol is based on two major technologies to ensure its security: asymmetric cryptography and a peer-to-peer network.

Asymmetric cryptography

A Bitcoin wallet is in fact only a means of storing cryptographic keys for electronic signatures. Like technologies such as PGP, SSH, or HTTPS, this mechanism relies on the ability of a user to generate a transaction and apply a unique digital signature, whose validity is trivial, but which no one can duplicate or modify.

This ensures optimal security for Bitcoin exchanges: unlike a credit card payment for example, once the transaction has been sent, it is impossible to modify it or retrieve the information provided to generate another one.

The Blockchain

As soon as they are generated, Bitcoin transactions are stored on a distributed database, of which there are thousands of copies worldwide. Replication of a transaction across all nodes on this network takes just a few seconds.

This ensures extremely strong resilience to Bitcoin: it is not possible to attack the system at any specific point to destroy it. The only way to prevent the use of Bitcoin in an economic space is to set up a giant firewall around it.

In addition to storage, Blockchain also ensures that all Bitcoin transactions are tamper-proof, including verifying the cryptographic signatures of each transaction, and preventing a person from spending the same funds twice.

Mining

The Bitcoin's monetary creation mechanism is its most complex part. Various individuals and professionals have computers dedicated to validating transactions on the Bitcoin network.

Transactions that have just appeared on the Bitcoin network are referred to as "pending confirmation". Every 10 minutes on average, through a random process, one of the mining machines manages to generate a cryptographic fingerprint that validates all pending transactions.

This mechanism is called a "confirmation", and any transaction that has received at least one confirmation is considered to be immutable and permanently etched in the Blockchain.

As soon as a valid footprint is found, all miners are notified and start working on the pending new transactions.

In order to pay for this confirmation work, which is essential for the proper functioning of the network, the machine that has succeeded in generating the valid cryptographic fingerprint is awarded a 25-bitcoins reward (in December 2015). This amount is engraved in the Bitcoin protocol and will be halved every four years. In June 2016, the award will be reduced to 12.5 Bitcoins, then 6.25 in 2020 and so on.

The monetary creation of bitcoins thus follows a predictable mathematical law, according to the following curve:

The latest bitcoin will be emitted in 2140, allowing a total quantity of 21 million bitcoins to be delivered. However, by 2025 we will have already exceeded 20 million.

From an economic point of view, Bitcoin is considered to be a metallist currency, whose behaviour is similar to that of precious metals such as gold, i. e. based on a resource that is difficult to generate - in this case, the cryptographic calculations made by miners - and whose total quantity is fixed.

Beyond its use as a simple and secure means of payment, its economic properties can make the Bitcoin a durable means of saving and independent of any inflationary mechanism, unlike current currency such as the euro or the dollar.

Risks

The Bitcoin is an experience that is now 6 years old, the feedback is not yet sufficient to ensure that there are no major bugs in the program. If this happens, it will lead to its immediate disappearance, particularly through loss of confidence.

The price of the Bitcoin is determined solely by supply and demand in a public market, resulting in potentially significant volatility. In addition, no centralized body such as the Banque de France or the ECB offers any guarantee as to its use.

As with any other product, never invest more than what you are prepared to lose.

Taxation

It is important for each user to check the tax and local specificities concerning Bitcoin operations. In France, the applicable tax regime is as follows: (source: Bulletin Officiel des Finances Publiques)

Gains from the sale of virtual units of account stored on an electronic medium (such as "bitcoins"), when occasional, are subject to income tax in the non-commercial profit category (NCB).

If the activity is carried out on a customary basis, it is subject to the taxation of industrial and commercial profits (BIC).

In addition, virtual units of account stored on an electronic medium are included in the solidarity tax base (ISF) and must therefore be included in the annual declaration of ISF of the debtors who own them.

Free transmissions of virtual units of account stored on an electronic medium shall also be subject to transfer duties free of charge, subject to the application of international conventions.

As far as VAT is concerned, the European Court ruled at the end of 2015 and confirmed the position of several Member States: the exchange of bitcoins for a legal currency can benefit from the exemptions provided for in the Directive as a financial transaction, so there is no VAT on the purchase and sale of Bitcoin.