So, are you planning to invest in cryptocurrency but do not know the very basics? Ever heard somebody talking about how beneficial it is but are confused when you hear the terms they used? You might be thinking that you don’t belong.
You no longer need to worry as we have gathered all the information that you need to know in layman terms.
Bitcoin is a digital currency that has been around since 2009. It’s not controlled or influenced by any one country, making it an outside candidate for mainstream use in financial transactions like other currencies are managed through banks and credit card companies.
Which could lead to increased volatility if used primarily as capital gains rather than consumption itemization on your monthly paycheck (which may be why you haven’t heard much about this before).
But beyond its uses at home – buying things online with bitcoins– there’s plenty more reasons why investors should take note.
Bitcoin skyrocketed in 2017 breaking all grounds leaving many to a shock and making millionaires.
Bitcoin’s price peaked in December 2017 at $20,000 before circling around $5,000 to $6,000 in the middle of 2018. It was valued at USD$900 in January 2017.
But there is so much more to Bitcoin that you need to know about Bitcoin before considering it as just a volatile means of investment.
So, without wasting any more time, let’s delve into everything that you need to know about Bitcoin. But in easy terms.
What Is Bitcoin Actually? The Basics
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
BitCoin is unique in that there are a finite number of them: 21 million. Miners are people who contribute their computing power to verifying and committing transactions to the blockchain. They are rewarded with newly created bitcoins and transaction fees. Bitcoin can be used to buy things electronically.
In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally. However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network.
This puts some people at ease because it means that a large bank can’t control their money.
A key question for anyone new to Bitcoin is: why would I use Bitcoin instead of standard currency? In many ways, Bitcoin resembles cash: It’s fungible (one Bitcoin is similar to another), it’s anonymous (nobody needs to know who owns what), and it doesn’t require permission from anyone to use it or make payments with it.
Notable Differences Between Bitcoin & Cash
That said, there are also some notable differences between Bitcoin and cash.
Bitcoin and cash are both payment methods with a few notable differences. For one, cash is physical currency that can be used to make purchases in person, while Bitcoin is a digital currency that can be used to make online purchases.
Secondly, cash is regulated by governments and central banks, while Bitcoin is decentralized and not subject to government control. Finally, cash is finite and can only be created through physical production, while Bitcoin is digital and can be created through mining.
As a result of these differences, Bitcoin and cash serve different purposes and have different strengths and weaknesses.
How Do You Mine Bitcoin?
Bitcoin mining is the process of verifying and adding transaction records to the public ledger (known as the blockchain).
This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place.
Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere. Mining is also the mechanism used to introduce new bitcoins into the system.
Miners are paid any transaction fees as well as a “subsidy” of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system through mining.
How Are Bitcoins Used?
Bitcoins can be made in various ways other than just mining them. The first is the ability to accept Bitcoins as payment for goods and services.
Your Bitcoin wallet is how you store, manage, and spend your digital currency, and setting one up is just as easy as setting up a PayPal account. They are accessible and cost nothing through a service provider like Coinbase.
There are websites that will compensate you in Bitcoins for finishing particular activities, even though it can take more time than it’s worth.
There are options to lend out your Bitcoins once you’ve earned them and receive interest. Even trading can be used to earn bitcoins, and just recently Bitcoin futures were introduced as a valid asset class.
Additionally, you can convert your local money for Bitcoins on exchanges, the biggest of which is Mt. Gox in Japan, which processes 70% of all Bitcoin transactions. More than 100,000 businesses, including Overstock.com, accept Bitcoin as payment for everything from pizza to gift cards.
How Can Bitcoins Be Stored?
bitcoins are digital currency, so it doesn’t exist in physical form. you can’t store them in a wallet like you would store physical currency.
Instead, they’re stored in a digital wallet, which is basically a piece of software that allows you to buy, sell, and hold bitcoins.
There are many different types of digital wallets, but they all work basically the same way. When you want to buy something with bitcoins, you use your digital wallet to send the payment to the merchant. the merchant then sends the bitcoins to your wallet.
It’s important to keep your digital wallet safe and secure, because if someone gets access to it, they can take your bitcoins. There are many ways to do this, but one popular method is to encrypt your wallet with a password.
What Is The Technology That Drives Bitcoin?
Blockchain technology is the foundation of Bitcoin.
A blockchain is a shared and maintained public record of all transactions that is shared and maintained by everyone using the Bitcoin network.
Blockchain technology is used to demonstrate the irrefutable nature of network transactions and avoid bitcoin double spending.
Alternative applications for blockchain technology exist in a number of different fields and sectors, including peer-to-peer energy trading in the energy sector and fractional property ownership in the real estate sector.
Blockchain technology has sparked a fresh wave of creative initiatives that aim to completely alter how society functions.
How Many Cryptocurrencies Are There and What Are They Worth?
There are currently more than 16,000 cryptocurrencies, according to CoinMarketCap. Their worth varies. As the biggest cryptocurrency, Bitcoin has a market valuation of approximately $900 billion.
Ethereum, the second-largest cryptocurrency, with a market valuation of less than $500 billion. Since there is no official data source for cryptocurrencies, unlike the public equity markets, it is difficult to estimate the size of the overall market.
Some estimates calculate the total market value of cryptocurrencies at $3 trillion. Each cryptocurrency may have many technical features in addition to making value transfers easier.
What Are The Advantages Of Bitcoin As An Investment Tool?
The cryptocurrency market is mainly uncontrolled, the price of bitcoin is very speculative, and bitcoin volatility is extremely high.
Anyone wishing to invest in Bitcoin must do so at their own risk and be willing to lose every penny.
The advantage of using Bitcoins for transactions is that they may be sent anywhere in the globe and withdrawn from any exchange regardless of the user’s location.
What Are The Risks Associated With Bitcoin?
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, thefts from exchanges, and the possibility that bitcoin is an economic bubble.
Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.
Overall, bitcoin remains in a gray area as the technological leap it represents is yet to be matched by regulatory oversight. This could change in the future if more governments start to take notice of cryptocurrencies and issue regulations accordingly.
For now, individuals should be aware of the risks associated with investing in or using Bitcoin.
Is Bitcoin Legal?
Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Research produced by the University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
Final Verdict
With the use of cryptocurrencies, parties can transfer money over the internet without the need for a central counterparty like a bank.
Additionally, 24 hours a day, 7 days a week, cryptocurrency enables rapid international value transfers. Some claim that bitcoin is a better method of exchanging value because it provides a level of immutability (irreversibility), security, and privacy that conventional money does not.
So, are you willing to invest in Bitcoin today?