How Bitcoin Actually Works

If you have invested your money in Bitcoin in 2011, say USD 100, then you should be able to make USD 2 Millions as of December 2017 yesterday. You can already become a billionaire with only a few hundred of USD, maybe become a trillionaire if you invest funds up to tens of millions of USD in a fairly short span of time, 5 years!


The funny thing is, many people in the United States especially get extraordinary fortune from the skyrocketing value of Bitcoin. Bitcoin is a hot topic in the world lately because of a drastic increase in value in just a short period of time. Seeing such lucrative conditions many people will be wondering, should you invest in Bitcoin too? Is it too late to get into Bitcoin investments? Can the benefits be as big as the benefits others have already gotten?

Before the question is answered, it helps us understand what Bitcoin is and how Bitcoin works. Looking back on the history of human civilization – gold, silver, and various other metals have been used as “currencies”, but the use of gold is the most popular among other metals. Gold was used as a medium of exchange until 1971, perhaps because of that reason also the existence of Bitcoin emerged lately.

Try to remember, we have been using paper money as a medium of exchange for hundreds of years, but a little different first because paper money is backed up by gold – that means, each use of $ 1 paper money represents a certain amount of gold in a bank. So, instead of having to carry a bag containing gold with difficulty wherever you go, people used to be able to easily carry paper money and get the gold at the bank whenever they needed.

In other words, you cannot conveniently print money like what the governments in each country now do, unless you have enough gold collateral at a bank. From that condition, problems arise. Shortly after the end of World War 2, the US dollar became an international currency because the United States has 70% of the total gold in the world! Thus the United States can print more money than any other country.

Unfortunately, the United States prints more money than the amount of gold they have so that when other countries want to exchange their dollars for gold – the United States can no longer fulfill that demand. That’s what happened in 1971. Since then, our good money in any country is just paper money without any real value attached to it. People who have power can print as much money as they want! As a result, prices soar every year.


It did not stop there, the world economy was destroyed in 2008. Actually in that year the Southeast-Asia Country, Indonesia did not have such a big impact thanks to Mrs. Sri Muliyani who was Minister of Finance in the era of President SBY at that time. Unlike the economies of European countries which shut down for a while – Indonesia was hit by the worst economic crisis only in 1998.

How did the crisis affected countries save their country’s economy at that time? Governments from various countries are printing more and more money.

The United States in particular prints new money with a value of $ 4 trillion dollars! Now, that’s the fundamental problem with paper money we have today – it can be easily printed by people who have power. A man named Satoshi Nakamoto came up with the idea of ​​a new decentralized currency that can be controlled by anyone as long as it is incorporated in a special network.

They are not part of any government and they cannot print money as they wish. This currency has the same limited amount as gold and is named Bitcoin. Then how does Bitcoin work? Bitcoin works with a technology called blockchain, actually quite complicated to understand but here’s a simple explanation.

Everything on the internet is a duplicate of the original data, until here we have to agree first. For example, this article is a duplicate of the original file that I wrote on the laptop and I can duplicate this article as much as I want. Something similar also happens on the internet – articles, pictures, songs, and so on. So, it’s impossible to create a digital currency because everyone can easily duplicate it. Well, that’s where the use of blockchain technology is!

Everyone on the blockchain technology network can clearly see the shift of Bitcoin from one person to another. In fact, you can easily see Bitcoin shift recordings when you join the network. If someone wants to try to corrupt this system, everyone who joins the network will immediately find out and stop it. In other words, it is almost impossible to cheat on this system.

All new transactions are collected in a block and every new block is created every 10 minutes and all these blocks are connected from one block to another, which is why this technology is named blockchain. However, regardless of how sophisticated this technology is, it can still be hacked right? Not really Each new block apart from recording existing transactions also stores old transaction records on the network. For the system to read a block, it must match all blocks that have been created on the network.

In fact, it is not only the old block and the current block that must match but also with the new block that will be created in 10 minutes later and other new blocks in the future. More important than that is that every block and every transaction must have sophisticated cryptography (code). Now, if the new block added doesn’t match the block that has been created and the block that will be created in the future, the cryptography in each block will change – which makes it easier to recognize cheating on the system.


This condition makes the system in Bitcoin almost impossible to be hacked not because no one understands how to hack it but rather the computer power needed to hack this system must be greater than the entire network – which means users of this network must have millions million people! The larger the system network, the safer the system. So, if you want to send money then you don’t need to go to the bank or to a 3rd party, you only need to do it with fingertips for free! If you need to send money abroad, you don’t need to wait for days for the bank to transfer money.

The time needed to transfer money with Bitcoin is only 10 minutes while waiting for the new block to be created! The question is do you have to invest in Bitcoin? The answer can be yes or no hehe. It can be, because digital money seems to be the medium of exchange for the future. The problem is, Bitcoin is not the only cryptocurrency. There are still other cryptocurrency such as Ethereum, Litecoin, and so forth. However, Bitcoin is a cryptocurrency that is growing very fast compared to the others.

That rapid growth is also a problem, in January 2017 the value of Bitcoin has grown from $ 850 to $ 19,000 until December 2017. We have to admit, everything that is developing so rapidly will eventually be destroyed in no time!

If you want to invest in Bitcoin you have to do more in-depth research on this digital currency.