Bitcoin is the first established cryptocurrency in the world. It was launched in January 2009 by a pseudonymous developer, Satoshi Nakamoto, whose true identity has yet to be verified. Everyone rumoured to be the real identity of BTC’s creator publicly denied being Nakamoto. It was introduced with the promise of lower transaction fees than traditional […]
Bitcoin is the first established cryptocurrency in the world. It was launched in January 2009 by a pseudonymous developer, Satoshi Nakamoto, whose true identity has yet to be verified. Everyone rumoured to be the real identity of BTC’s creator publicly denied being Nakamoto. It was introduced with the promise of lower transaction fees than traditional online payment mechanisms, and unlike government-issued currencies, it is operated by a decentralized authority.
What makes Bitcoin advantageous to a lot of people is that no authority can interfere with Bitcoin transactions, take people’s money away, or impose transaction fees. It has full independence from world governments, banks, and corporations.
Besides, every Bitcoin transaction gets stored in a massively distributed ledger called the blockchain, which makes the BTC movement extremely transparent. It means that if someone attempts to fraud in a block – a combined digital record of the transaction – it can be easily spotted and corrected by anyone. Also, Bitcoin gives its users total control over their finances since it is not controlled as a network.
How Are Bitcoins Created?
In the traditional financial system, fiat money is usually created by having central banks print out the money. Since bitcoin is not controlled by any central authority and is not a physical money, it cannot be created through printing.
New bitcoins are created through a process called mining. The process involves solving complex mathematical computations using cryptography. Miners, also called nodes, use up a lot of electricity and computational power to create new bitcoins. As such, mining bitcoin isn’t easy, and it takes an average of ten minutes to have one coin created.
Once a miner has solved the puzzle, they put up the solution in the network. Other miners have to be in consensus that the puzzle is solved, after which the miner adds a new block to the blockchain and they get a block reward. Currently, miners get 6.25 BTC for every block mined. This amount is usually reduced by half, after every halving event, which occurs after every four years.
Bitcoin Fun Fact: Satoshi left Bitcoin in the hands of a few prominent members of the BTC community around mid-2010 and named Gavin Anderson as a lead developer.
Acquiring and Storing Bitcoins
Seeing as bitcoin mining is a tedious process that needs a lot of computational power, not many people can mine bitcoins. So, how do you go about obtaining some bitcoins?
Your best bet would be to buy the coins in a cryptocurrency exchange. These are online platforms that allow users to exchange fiat money for bitcoin and other cryptocurrencies. There are several crypto exchanges that you can use. But, it would be best if you were careful to get one that is legitimate and won’t end in you losing your money.
Coinbase, Etoro, and Bitfinex are some of the notable exchanges you can use to buy bitcoins. When choosing an exchange, be sure to do some diligent research since these platforms differ. They come with different features, have different requirements, and offer different trading opportunities.
When it comes to storing your bitcoins, you will need a digital wallet. The wallet contains a combination of addresses and keys to help secure the coins inside. It works similarly to a bank account, only that in this case, you are solely responsible for the safety of your funds.
Like exchanges, there are different types of digital wallets. When choosing one, bear in mind the different levels of security that each wallet provides. You can either have a web, paper, mobile, or hardware wallet. Of these options, the hardware wallet is the most secure one and is ideal if you are going to be storing large amounts of bitcoins.
Advantages of Bitcoin
Bitcoin gives everyone freedom from any intermediaries being in charge of your money. Cryptocurrencies are as legitimate as fiat currencies when it comes to buying things. With the existence of numerous deep-web markets that only accept Bitcoins in mind, you may be able to purchase some things more comfortable with BTC than with any other currency.
- Safety and Control
Bitcoin gives its users full control of their transactions. No one can steal your payment information from merchants or withdraw money from your account without you knowing and agreeing to it. Also, BTC allows its users to protect their money with backup copies and encryption.
- Can’t be counterfeited
An excellent example of counterfeiting in the digital world is using the same money twice – also called a ‘double spend’ – interpreting both transactions fraudulent. Bitcoin counters this by using blockchain technology as well as the various consensus mechanisms built into all BTC algorithms.
Drawbacks of Bitcoin
- Legalization and level of recognition
The use and trade of Bitcoins is encouraged in some countries and banned and outlawed in others. The legal variation from country to country makes it hard for the mass adoption of Bitcoins.
Although a lot of countries have recognized and legalized Bitcoin, those countries that have not, have the majority of their businesses, whether big or small, utterly oblivious to it.
The cryptocurrency market is highly volatile, with its prices scurrying up and down, going through various bubbles and busts. Bitcoin’s price is unpredictable, like, throughout its history, it has been conquering new heights, only to sustain a massive drop straight after. The rapid and drastic changes can cause significant financial damage to an imprudent investor.
Bitcoin has appeared as one of the most innovative technologies in modern times since it began in 2009. Although several other cryptocurrencies have emerged since then, Bitcoin remains to be the most popular one by market capitalization. If you are looking to delve into the world of cryptocurrencies, getting acquainted with Bitcoins would be the ideal place to get started.