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 heard it.
Again chances are that you got interested in it but had no idea where to start because you’ve heard both negatives and positives about it. If you are in that kind of dilemma then don’t worry because we got you.
This article talks about bitcoin and all that you need to know about it to get you started.
What is bitcoin?
Graphic Credit: blockgeeks.com
If you search up the above phrase on google, it will bring you a handful of confusing results that making up your mind on what bitcoins are can prove to be quite a daunting task.
Fortunately, we are not here to rack you up with a string of vocabulary and leave you more confused than you first were.
So in a layman’s a language, a bitcoin is a digital currency. In short it has no physical form like fiat currencies, or in other words, does not undergo any kind of coin minting process or bill printing.
It is purely digital and is not regulated by any government, financial institution or any authorities.
It is created and held electronically and you can carry out transactions say buy products from a certain vendor who is abroad and pay him/her directly without having to involve any third party for instance banks.
A brief history of how bitcoin came to be
It was released in 2009, by a mysterious man who tags himself as Satoshi Nakamoto.
After its release, he claimed to be a thirty-six-year-old computer coder of Japanese origin and no one in this advanced era of paparazzi and technology has any idea who he is, how he looks like or where he is from.
Satoshi used a website and an email which were imperceptible to release hundreds of posts which explained how bitcoins work and how it would change the world.
He even invited other software developers to help him improve the code but to date, no one has a single personal detail about him.
But with the level of expertise he has 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. What we however know is 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 which would be immune to the unpredictable financial storms and also one which would make things easier for everyone by eliminating third parties and at the same time ensure that no one can spend the same amount of money twice hence eliminate chances of fraud and other unethical practices.
He achieved this perfectly through the blockchain technology which encrypts each transaction in such a way that the movement of each bitcoin is recorded and the entire network can see it.
Additionally, every bitcoin transaction cannot be altered with because all the other parties will see it and will also be able to identify who is trying to alter the system.
After successfully 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.
Most people often wonder why someone would hide their identity after coming up with such a great invention.
Well, doing so could get you in a lot of trouble as it is a violation of the federal law because 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
As mentioned earlier, you can transact with anyone and in any part of the world without having to deal 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 who is in Europe, you can effortlessly buy what you want directly. Unlike in 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 as long as you have the technical know-how to do the mining then you are free to mine and sell it to others or use it to buy goods and services.
It runs on an open network of computers across the world and as such it is decentralized.
It is secure and transparent
Another reason why bitcoin is embraced worldwide is because it is secure and transparent. By secure we mean that you can carry out transactions, you can buy, sell or exchange it for other cryptos without having to leak any sensitive information about yourself.
Additionally, it is transparent because every single 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 my back and taking their money back. That is why bitcoin is termed as transparent.
What you do with your bitcoins is purely up to you and the person you are carrying out transactions with. Reason being, it requires no third party.
This is one of the bitcoin’s downsides. Once you send it to someone, 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 have to be incredibly careful while transferring bitcoin from your wallet to another person’s.
Unlike traditional currency, bitcoin’s supply is limited by an underlying algorithm. When he released the software, Satoshi Nakamoto told the world that there was a maximum of 21 million bitcoin only to be spread over the next 20 years and then he disappeared. Thus it’s difficult 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 the reason why its value continues to increase because, the more people want it the higher its value yet the supply remains the same.
How do I acquire bitcoins?
To acquire bitcoin through mining, you need extensive skills in cryptography so you can solve the 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 in every ten minutes.
If you have the technical proficiency to mine bitcoins, then you can be earning big by mining and then selling it at a price favorable to the market or keep it until the pattern moves up then cell.
However, it is not as easy as it sounds and you require specific integrated circuit chips (ASIC) to mine.
Someone can send you bitcoins from his/her bitcoin wallet just like you do with normal cash transfers.
It is possible to exchange other cryptocurrencies for bitcoins. For instance, you can exchange Ethereum for bitcoin depending on the market price. However, you need to be extra careful while doing so and exchange it with legal exchange brokers such as coinbase.
What is a bitcoin wallet?
Graphic Credit: blockgeeks.com
Just like a bitcoin is a digital currency so is a bitcoin wallet. 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 what you keep in this wallet is your private key which enables you to send or receive this cryptocurrency. Quite a handful, right? Let us break this down.
A bitcoin wallet is more like your bank account. It is what 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 which 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 and as such once you send it to the wrong person there is no turning back because first of all, you can never know who it is you sent it to and secondly, once this transaction is finalized by reaching the blockchain you cannot alter it
- It allows anonymity hence 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
Even though it has several risks, bitcoin is a wise investment choice especially considering that its value will continue to rise over time as more and more people accept it.
It offers an easy way to finalize transactions and is also cheap as it is immune to bank rates and other money transfer charges. Even when converting to fiat currency, the rates are still affordable.
We look forward to a world where everything will be operated through bitcoins and cryptocurrency as things will be way much easier.