What is Bitcoin (BTC)? A complete Beginners Guide

Bitcoin is a revolutionary form of digital currency that has revolutionized how people think about money. It’s decentralized, borderless, and secure – allowing users to make fast transactions with minimal fees. With Bitcoin being one of the world’s most popular cryptocurrencies, it can be used in a variety of ways across many different platforms – from online marketplaces and eCommerce sites to investing. In this article, we’ll explore what makes Bitcoin special – basically what it is, how it works, and its potential applications.

Ready? Let’s start with the basics…

What is Bitcoin (BTC)?

Bitcoin is a new kind of money, a digital /virtual currency that uses highly decentralized and peer-to-peer technology to facilitate payments and cash transfers. It differs from traditional currencies because their creation, distribution, and storage are facilitated by a highly decentralized ledger referred to as the blockchain.

Both the Bitcoin digital currency and the Bitcoin blockchain were created and introduced to the world in 2009 by a mysterious individual, pseudonymously referred to as Satoshi Nakamoto. A decentralized community of developers and miners (Bitcoin transaction validators) has nevertheless taken up its development and maintenance.

We must however mention that, while digital currency was introduced to us in 2009 by Satoshi, the concept of digital currency was birthed by David Chaum in 1983. He even created DigiCash Company to implement his ideas in 1988, but it declared bankruptcy less than a decade later.

Several highly rudimental digital currencies have come up since, including e-gold, Liberty Reserve, Tencent’s QQ, and even PayPal. But it was Satoshi Nakamoto’s infusion of the digital cash concept with cryptography that would help Bitcoin stand out and ignite a revolution against fiat currency.

How is Bitcoin Created?

Bitcoin is created through a process called mining, which involves using powerful computers to solve complex equations. The miner who successfully solves the equation is rewarded with Bitcoin and the transaction is verified on a public ledger known as the blockchain. This reward incentivizes miners to continue verifying and validating transactions, thereby keeping the network secure. This process makes it difficult for anyone to tamper with or counterfeit Bitcoin as every transaction is recorded on the blockchain.

Unlike fiat money or traditional currencies, Bitcoin is not issued or backed by any government or central authority. Instead, it exists as a ledger of transactions stored on computers around the world in what is known as the blockchain.

What is the Purpose of Bitcoin?

1. Peer-to-Peer Payments

The most common use of bitcoin is for peer-to-peer payments. This means that people can transfer money to each other directly and without any third parties such as banks or payment processors. Bitcoin transactions are faster than traditional bank transfers and have a low cost associated with them.

2. Investment Vehicle

Another popular use for bitcoin is as an investment vehicle. Bitcoin has had a history of extreme volatility, which makes it attractive to investors who are looking for short-term opportunities to make a profit from market fluctuations. Of course, this comes with significant risk – it’s important to remember that you could potentially lose your entire investment if the price of bitcoin crashes unexpectedly.

3. Store of Value

Bitcoin also serves as a store of value, similar to gold or other precious metals that have traditionally been used as forms of currency in different societies throughout history. Unlike fiat currencies (like the US dollar), which are susceptible to inflation due to their finite supply, bitcoin has a finite supply – only 21 million bitcoins will ever be created – making it immune to inflationary effects over time.

4. Merchant Payments & Services

Many merchants now accept bitcoin payments for goods and services. This provides customers with an alternative form of payment outside of traditional methods such as credit cards or cash payments. Some businesses even offer discounts for customers who pay with bitcoin!

5. International Money Transfers

Finally, bitcoin can be used for international money transfers for individuals who may not have access to traditional banking services or those who prefer to send money quickly and securely online without paying high fees associated with international transfers through financial institutions such as banks or Western Union. With just an internet connection, anyone can send bitcoins across borders without worrying about exchange rates or lengthy processing times associated with more traditional methods of international money transfer such as wire transfers or checks.

How Does Bitcoin Work?

On the most basic level, it works by allowing users to buy and sell bitcoins using a cryptocurrency wallet. This wallet is simply a secure platform that stores user data, such as personal information and Bitcoin balances. Bitcoin works by utilizing a decentralized public ledger called the blockchain. This digital ledger records every transaction made on the Bitcoin network and is distributed among thousands of computers around the world. Each transaction that occurs between two users is processed by miners who validate each transaction with the correct digital signature. Once all transactions in the block are validated, the Bitcoin ledger records and updates the data for each individual’s account, creating new amounts of Bitcoin which increases their “balance.”

Bitcoin’s Blockchain Technology

Bitcoin has revolutionized modern finance with its unique blockchain technology. This groundbreaking technology creates a network of trusted data that is both secure and public. Blockchain networks have advanced features such as distributed ledgers, smart contracts, and immutable records, which prevent fraud and develop trust between participants in the network.

Bitcoin’s blockchain technology records and stores information on all transactions made with the digital cryptocurrency. It acts as an immutable record of every transaction that has taken place on the Bitcoin network, verifying and validating them as they occur. As we earlier mentioned, the blockchain is maintained by miners who use powerful computers to solve complex cryptographic puzzles to validate transactions. This system ensures that only legitimate transactions are added to the blockchain, making it difficult for hackers or malicious actors to alter or tamper with data stored in it. Due to its decentralized nature, no single person or entity has control over the Bitcoin network, giving users greater autonomy when it comes to managing their funds.

From cryptocurrency to energy trading, there is no doubt that Bitcoin’s blockchain technology is making waves in the modern world.

What is Bitcoin Mining?

Bitcoin mining is the process of adding transactions to the public ledger of past transactions, called the blockchain. It is done through a process called proof-of-work, which involves solving a complex computational problem to create a new block of transactions.

Miners compete to be the first to solve the problem and add the new block to the blockchain. In return for their efforts, they are rewarded with a certain number of bitcoins. The reward for mining a block is halved approximately every four years, and the total number of bitcoins that can be mined is capped at 21 million.

The process of mining is essential to the security and integrity of the Bitcoin network. It ensures that the blockchain remains decentralized and helps to prevent fraud and double spending. Miners use powerful computers to solve the complex mathematical equations that are required to create a new block, and the process requires a lot of computing power and electricity.

As the demand for Bitcoin has increased over time, the difficulty of mining has also increased, and it has become more expensive and resource-intensive to mine bitcoins. This has led to the emergence of large-scale mining operations, which use specialized equipment and consume vast amounts of electricity to extract new bitcoins.

How to Mine Bitcoin?

To become a miner, you need specialized hardware known as an ASIC (application-specific integrated circuit) miner or GPU (graphics processing unit). These devices have been specifically designed for bitcoin mining and will hash at much higher rates than traditional computers or GPUs. You’ll also need access to cheap electricity to run your hardware efficiently and profitably over time.

Once you have all of your hardware set up and ready to go, you can then connect it to a bitcoin mining pool or an individual node on the blockchain network. This allows you to combine your hashing power with other miners to increase your chances of finding blocks and earning rewards faster.

Once everything is set up, you are good to start validating transactions, earning transaction fees and newly created Bitcoins for each confirmed block in the chain.

It is important to note that mining Bitcoin is not recommended for most people. It requires specialized hardware and a lot of electricity, and the rewards are not guaranteed. If you are interested in investing in Bitcoin, it is recommended that you buy Bitcoin instead of mining it.

How to Buy Bitcoin?

Over the years, most of these Bitcoin trading platforms have worked hard to eliminate bureaucracies and make the process of buying bitcoins as easy as possible. Today, you only need to create an account and verify your identity, deposit funds, and make a purchase.

Step 1: Create an account

The Bitcoin buying process starts with identifying reputable and reliable Bitcoin exchanges and creating a trader account there. Most will also demand that you verify your identity before you can start Buying BTC. But the process is quite easy for most exchanges.

When choosing an exchange, we recommend that you only consider regulated exchanges. There are several options available to you, and we will be looking at the best six hereinbelow.

Step 2: Fund the account

After creating and verifying your trading account. You will now want to deposit some funds so you can start buying Bitcoins. Most exchanges support multiple payment methods and the option available to you will be largely dependent on your country of residence.

You can deposit and withdraw using a  credit card, a  debit card, a Bank transfer, and eWallets like Skrill, Neteller, and PayPal.

Step 3: Buy Bitcoin with or without leverage

After verifying your account and depositing funds you can now proceed to buy bitcoins. Depending on the chosen crypto exchange, you can buy actual bitcoins and be presented with a private key or buy Bitcoin CFDs.

Some exchanges like the eToro trading platform will also let you buy actual Bitcoins and trade Bitcoin CFDs. And when trading Bitcoin CFDs and such other derivatives as Bitcoin Futures and options contracts, you will have access to trading leverages as high as 125:1.

Open A Free Account

Deposit Funds

Buy Cryptocurrency

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Bitcoin Alternatives

Since the Foundation of Bitcoin and the Bitcoin Blockchain technology, many digital cryptocurrencies have emerged inspired by the revolutionary idea of cryptography used in the digital world. There are now thousands of cryptocurrencies circulating the net. Below are a few of the most popular Bitcoin alternative coins.

1. 1. Ethereum: Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract functionality. It provides a decentralized virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes.
   2. Litecoin: Litecoin is an open-source, peer-to-peer cryptocurrency inspired by Bitcoin. It is based on the same code as Bitcoin but with a faster block time and lower transaction fees.
   3. Dogecoin: Dogecoin is a decentralized, peer-to-peer digital currency. It was created as a joke based on the popular “Doge” meme but has since grown to become one of the most popular cryptocurrencies.
   4. Ripple: Ripple is a real-time gross settlement system (RTGS) used to facilitate international payments. It is based on a distributed, open-source internet protocol and is designed to enable secure, instant, and nearly free global financial transactions of any size with no chargebacks.
   5. Dash: Dash is an open-source peer-to-peer cryptocurrency designed to offer a wide range of financial services including private and instant transactions. It is based on a decentralized network of master nodes and incentivizes users to operate master nodes with rewards.
   6. Zcash: Zcash is a cryptocurrency that utilizes zero-knowledge proofs to provide users with enhanced privacy and security.

Conclusion

Bitcoin has made a powerful impact on the world of finance, offering secure and efficient transactions for users. Whether you’re a beginner or an experienced investor, there is much to be gained from exploring what Bitcoin has to offer. With its borderless nature and low fees, it’s no wonder that this cryptocurrency is fast becoming one of the most popular digital currencies around. So if you are looking for an innovative new way to make payments or invest, Bitcoin could be the perfect option for you.