Whether you are in your teen years, early, 20’s mid thirty’s, or already living in your golden age, 99.9% chances are that you’ve read or heard about bitcoins more times than you can recall, and the word cryptocurrency is like music to your ears thanks to the countless times you’ve listened to it.
Again, chances are that you became interested in it but had no idea where to start because you’ve heard both negative and positive things about it. If you are in that kind of dilemma, then don’t worry—we got you.
This article talks about Bitcoin and everything you need to know to get started.
What is Bitcoin?
If you search for the above phrase on Google, you will find a handful of confusing results, making it quite a daunting task to decide what bitcoins are.
Fortunately, we are not here to overload you with vocabulary and leave you more confused than you were before.
So, in layman’s language, bitcoin is a digital currency. In short, it has no physical form like fiat currencies; in other words, it does not undergo any coin minting process or bill printing.
It is purely digital and is not regulated by any government, financial institution, or authorities.
It is created and held electronically, and you can carry out transactions, such as buying products from a certain vendor who is abroad and paying him/her directly without having to involve any third party, such as banks.
Bitcoin is the mother of all cryptocurrencies because the idea of all the others was born from it. Take a look at the brief Bitcoin history below to grasp its full meaning.
A Brief History of How Bitcoin Came to Be
It was released in 2009 by a mysterious man named Satoshi Nakamoto. After its release, he claimed to be a thirty-six-year-old computer coder of Japanese origin.
In this advanced era of paparazzi and technology, no one had any idea who he was, how he looked, or where he was from.
Satoshi used an imperceptible website and email to release hundreds of posts explaining how bitcoins work and how they will change the world.
He even invited other software developers to help him improve the code, but no one had any personal details about him.
But given his expertise in coding, it wouldn’t come as a surprise if he created his own kind of high-tech remote virtual browser and even email.
For all we know, Satoshi Nakamoto could be a group of people. However, we know that Satoshi Nakamoto caused a major revolution in the world after the release of bitcoins in 2009.
His primary goal was to create a new electronic cash system that would be immune to unpredictable financial storms, make things easier for everyone by eliminating third parties, and ensure that no one can spend the same amount of money twice, hence eliminating the chances of fraud and other unethical practices.
He achieved this perfectly through blockchain technology, which encrypts each transaction so that the movement of each bitcoin is recorded, and the entire network can see it.
Additionally, every Bitcoin transaction cannot be altered because all the other parties will see it and be able to identify who is trying to alter the system.
After completing this, Satoshi Nakamoto sent an email to one of the developers he was working with, saying that he would no longer be involved in the world of Bitcoin, and just like that, he vanished into thin air.
People often wonder why someone would hide their identity after developing such a great invention.
Well, doing so could get you in a lot of trouble, as it is a violation of federal law. It’s like you are trying to compete with the government and creating an avenue for criminals to carry out transactions anonymously, but that’s a topic for another day.
Features of Bitcoin
It’s Global
As mentioned earlier, you can transact with anyone in any part of the world without dealing with foreign exchange.
It is recognized worldwide, and unlike fiat currencies, where you have to switch from USD to euro in order to transact with someone in Europe, you can effortlessly buy what you want directly. Unlike forex trade, it has no subjective limits.
It is Not Regulated
Again, bitcoin is not regulated by any type of authority or government. It is mined from the internet and is available at anyone’s disposal.
If you have the technical know-how to do the mining, you can mine and sell it to others or use it to buy goods and services.
It runs on an open network of computers worldwide, and as such, it is decentralized.
It is Secure and Transparent
Another reason Bitcoin is embraced worldwide is that it is secure and transparent. By safe, we mean that you can carry out transactions, buy, sell, or exchange them for other cryptos without leaking any sensitive information about yourself.
It is also transparent because every transaction is published on the blockchain. That prevents anyone from going behind your back and carrying out fraudulent activities.
For instance, if I sell merchandise to person B and they pay me using Bitcoin, this is automatically published on the network, preventing them from going behind and taking their money back. That is why Bitcoin is termed as transparent.
Private
What you do with your bitcoins is purely up to you and the person you transact with. The reason is that it requires no third party.
Irreversible
This is one of bitcoin’s downsides. Once you send it to someone, the chances of getting it back are close to zero.
Even though sometimes it is possible, it may take months to get it back, and that happens only if the person you sent it to is willing to return.
Hence, you must be incredibly careful while transferring Bitcoin from your wallet to another person.
Limited Supply
Unlike traditional currency, bitcoin’s supply is limited by an underlying algorithm.
When he released the software, Satoshi Nakamoto told the world that a maximum of 21 million bitcoins would be distributed over the next 20 years, and then he disappeared.
Thus, it isn’t easy to mine, and only a few new bitcoins are released every hour.
Currently, 12 million bitcoins have been mined, and with only a few remaining, that is possibly why its value continues to increase: the more people want it, the higher its value, yet the supply remains the same.
How Do I Acquire Bitcoins?
Mining
To acquire Bitcoin through mining, you need extensive cryptography skills to solve complex algorithms.
That is why only a few bitcoins are created every hour, and anyone who manages to mine is often awarded 12.5 bitcoins every ten minutes.
If you have the technical proficiency to mine bitcoins, you can earn big by mining and then selling them at a Bitcoin price favorable to the market or keeping them until the pattern moves up.
However, it is not as easy as it sounds, and you need to mine specific integrated circuit chips (ASIC).
Transfers
Someone can send you bitcoins from his/her Bitcoin wallet just like you do with normal cash transfers.
Exchange
It is possible to exchange other cryptocurrencies for bitcoins. For instance, depending on the market price, you can exchange Ethereum for Bitcoin.
However, you must be extra careful and exchange it with legal exchange brokers such as coinbase.
What is a Bitcoin Wallet?
Just like Bitcoin is a digital currency, a Bitcoin wallet is also a digital currency. It simply refers to where your Bitcoin is stored and is equivalent to your bank account. It allows you to send or receive bitcoins.
However, bitcoins have no physical form and cannot be stored anywhere, so you keep your private key in this wallet, which enables you to send or receive this cryptocurrency. Quite a handful, right? Let us break this down.
A bitcoin wallet is more like a bank account. It enables you to send or receive bitcoins, just like your bank account allows you to do with cash.
However, instead of storing bitcoins, this virtual wallet stores your private key, which can be compared to your bank account number. This number is what someone else sees when you send money to their account.
In other words, you can’t have an account without the account number, so the private key is like your identity when you send or receive bitcoins, while the wallet is a virtual representation of the account.
Risks associated with bitcoins
- We mentioned earlier that it is irreversible. As such, once you send it to the wrong person, there is no turning back because, first of all, you can never know who you sent it to. Second, once this transaction is finalized by reaching the blockchain, you cannot alter it.
- It allows anonymity, placing you at the risk of money launderers and criminals.
- It is decentralized, which again places you at the risk of being hacked and losing all your money to hackers, as they also have control over it.
- Its value relies on the number of people who accept it worldwide, and if other cryptocurrencies take over, its value might take a dip, causing massive losses to those who own a lot of it.
