Despite being one of the most popular and talked about cryptocurrencies in the world today, Bitcoin still remains a mystery to most. However, today you are in luck as we are going to change that. In this article, we will discuss everything you need to know about Bitcoin from its history to how to get your hands on some.
To start with, bitcoin happens to be a new age currency that you can easily access online. One of the perks about this currency is that it allows you to make anonymous transactions. That is why most people’s first impression of Bitcoin Isn’t always on the positive side.
The truth is, the majority of people perceive Bitcoin as suspicious and even somehow dangerous. We have all heard of the theories that people have come up without there. That is why we have come with all the facts that you need to know about Bitcoin. This will help you answer most of your questions about this new age currency. Shall we get started?
What is Bitcoin?
Bitcoin happens to be a digital currency that is designed for the payment of goods and services the same way you do with US dollars and Euros. The only difference is that Bitcoin is independent of any country and available for anyone who is connected to the internet. This means that Bitcoin is not controlled by any federal government or central banks.
More to that, Bitcoin is also used as a store of value. In that, Bitcoin holds a lot of value just like gold and cash but in an entirely digital way. The same way you would store your money in a bank, Bitcoin comes with Bitcoin wallets.
Everything about Bitcoin Is done electronically. And for that reason, there is no involvement of fiat currency or any other paper currency. These bitcoin wallets are what you use when you need to either send or receive bitcoin.
The bitcoin wallets come with unique wallets addresses. These wallets addresses help to ensure the anonymity of all the transactions you make. This keeps you safe from anyone tracing back the transactions you make to you.
A Brief History of Bitcoin
To date, the origin of Bitcoins is not known. That’s probably because the founders wanted to remain anonymous. However, in October 2008, there’s was a paper that was published under the mailing list of ‘Cryptography’
The pseudonym behind this publication was ‘Satoshi Nakamoto’ who is still a big mystery to date. Al in all, the very first Bitcoin open source was released in 2009. During the same time, the first Bitcoin was also released. A 50 bitcoins reward was issued during the first mining of the Bitcoin block under the name genesis block.
Understanding How Bitcoins Work
Let’s be honest with each other, Bitcoins are not something that you will understand with onego. Especially if you are new to this, it can be very confusing. But don’t worry as this section got you covered on that.
Bitcoin is a digital currency that operates on blockchain technology. Well, a blockchain is more of a public ledger that the entire Bitcoin Network relies on. All transactions on the Bitcoin network including any newly added bitcoins and other confirmed transactions are verified using the blockchains.
In simple terms, the blockchains are like the ledgers that are maintained by banks. Only that in this case, the ledgers are maintained by the public and they are accessible to anyone who would like to match a transaction.
In addition to that, Bitcoin also uses a public key that uses two kinds of information authenticate the message. As soon as you set up your bitcoin wallet, you get asked to set up a private key. The private key is the most vital part of the security of your Bitcoins.
Therefore, you should always write down your key and keep it somewhere safe. Also, just like any other passwords, do not share your private keys with anyone.
What About the Anonymity of Bitcoins?
All the bitcoin transactions are stored in a public ledger. This is to say that anyone can be able to link your transaction to you over a period of time. That said, the simple answer is No. Bitcoin is not completely anonymous. Government agencies or even some talented hackers can be able to trace everything back to you.
There is no denying, the bitcoin transactions are transmitted randomly over the peer to peer network. This is what brings in the anonymity aspect, but the truth is that this may not always hold up.
A hacker who can be able to connect a couple of nodes to the Bitcoin Network they can be able to combine the data collected and even be able to determine the origin of these transactions. That is why you need to check your county’s tax regulations lest you get into trouble.
How do I get Bitcoins?
1. You can buy Bitcoins using cash
There are many ways in which you can acquire bitcoins. One of the easiest for beginners is wire transfers, debits cards, credit cards, or even hard cash. However, first, you need to establish a Bitcoin wallet.
Your wallet ID is derived from your Bitcoin wallet. The Bitcoin wallet plays the role of holding and storing your bitcoins the same way you hold cash and credit cards using your wallet. There is a wide range of Bitcoin wallets that you can choose from. This includes:
- An online-based wallet
- A software wallet that is stored on your computer
- A vault service which is an offline wallet that protects your bitcoins using encrypted keys
All of the above mentioned Bitcoin wallets come with a range of pros and cons. All in all, the online-based wallet and software wallet comes with most of the drawbacks. If you store your bitcoins on your computer, you will be needing to use it regularly. On the other hand, online based wallets are more susceptible to hack attacks.
All in all, the online based wallets are still the best option especially if you are an everyday user and are not looking for complete anonymity. It is easy to use and doesn’t come with complicated setup procedures. It is important that you do your research well and know which wallet best suits your needs.
2. Through Mining or Trading
One of the other easiest ways of getting Bitcoins is by trading. When it comes to trading bitcoins, there are a number of proven strategies, it all depends on what the trader wants. Through trading, you get a better chance of increasing your crypto holdings.
Today, the most popular way to trade has turned out to be leverage trading. This is a case where the traders borrow funds which they then use to bolster their trading. These are what are refeed to as crypto-backed loans.
When it comes to mining cryptocurrencies, you need a personal computer with mining software. There is a couple of trustworthy mining software out there that you can consider. The best thing is that the applications run in the background as you continue doing other things. The best way of earning passive income.
In the cryptocurrency mining process, the miners engaged in the calculation of complex cryptographic algorithms. This is a process that helps to confirm all the Bitcoin Transactions taking place then adding them to the public records of the blockchain. Block rewards are the incentives that are given the crypto miners.
These block rewards give miners free Bitcoins which is in exchange for their efforts in mining. However, the mining difficulty of Bitcoins could vary from time to time. That is because it depends on the number of people mining the Bitcoins at a particular time and how busy the transaction network is at that time.
Is Bitcoin Mining Legal?
The process of mining Bitcoins might sound completely illegal to most people. The good news, however, is that the process is completely legal especially in the United States of America. All in all, you need to be careful as the international laws may differ from country to country in how they perceive and treat Bitcoins as well as other cryptocurrencies in general.
This means that the laws that govern cryptocurrencies are still evolving. Hence, the use and distribution of Bitcoinsis still highly restricted in some areas. Therefore, it could be very risky especially with regards to taxation. All in all, most of the legal issues with Bitcoins come in when there is an issue with what you purchased using your Bitcoins.
How Safe is it to Use Bitcoins?
The same way that thieves will be after your fat wallet, is the same way hackers will be after your Bitcoins. Therefore, it is important that you ensure the ultimate security of your Bitcoins by storing them in a highly secure way.
Bitcoin wallets are one of the common and safest ways of storing your Bitcoins. Some of the most common Bitcoin wallets you will get are Ledger Nano S and Trezor. The Ledger Nano S is one of the most secure Bitcoin Wallets that you can have.
On the other hand, Trezor is a hardware wallet that you can use to keep your Bitcoins safely. The fact that it is a hardware wallet, it gives the user private keys offline that you use to access your Bitcoins.
Is it Worth Investing in Bitcoins?
Now that we have an overview of all the basics about Bitcoin, you are probably wondering if it’s the right call to invest in Bitcoins. But before you take that step, here are a few things that you need to know.
1. There is a high demand for Bitcoin
We will all agree that when something is limited, demand gets high. And Bitcoins are no exception in this case. There are few Bitcoins in circulation and by the year 2040, there will be no creation of more Bitcoins.
Therefore, it is a great idea to get in early enough and get hold of some. Not to mention that investing in Bitcoins will also help to diversify your portfolio. Since, its rumoured that governments ought to be after Bitcoins, the already limited edition of Bitcoins might only get worse while the demand might get even higher.
2. There is no agency that governs Bitcoins
If you are thinking of investing in Bitcoins, you should know that it cannot compare to having money in the bank or investing in the stock market. The fact that there is no government or agency governing Bitcoins, everything is up to you when you engage in trading Bitcoins.
More to that, the fact that Bitcoins have an unregulated nature, their price tends to fluctuate every now and then. If you are not ready for the risk that comes with Bitcoin investment, then you probably should consider other safer investment options.
Finally, Bitcoin Doesn’t contain any tangible value like gold. Therefore, the value of Bitcoin is determined by people which is somehow scary.
3. The mining of Bitcoin tends to be very expensive.
The mining of Bitcoins Sounds like a very appetizing process. However, you need to know that this process is very expensive.
That is because you need to purchase a software that comes with the capability to calculate the complex codes used in mining of bitcoins. This software is not cheap and it could cost up to thousands of dollars.
4. Holding and Buying of Bitcoins
The most popular form of investing in Bitcoins is buying then holding Bitcoin with the hope that it will appreciate in value over time. In such a case, you should never invest an amount that you cannot afford to lose. Bitcoin is a very risky investment as the price tends to fluctuate from time to time.
Also, when buying Bitcoins, it is important that you buy from highly reputable platforms. Lastly, you should try to not buy all your Bitcoins in just one trade. With proper distribution, you will get to buy Bitcoins while it’s on a rising graph instead of when the price is constantly fluctuating.