All You Need to Know About Bitcoin

Before we properly discuss the basics of what bitcoin is and how it works, the basic thought to carry about bitcoin is that it is an electronic currency or asset that exists only online, thereby making it independent of any country or organization. Its value is worth money, meaning it can be spent like everyday cash and traded in any currency. Its value can also equate the worth of gold.

What is Bitcoin

A more technical term to the definition of bitcoin is that bitcoin is a decentralized digital currency, a type of cryptocurrency which is independent of a central financial institution or a sole administrator. Bitcoin (₿) can also be defined as a digital asset (cryptocurrency) invented to work as a medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. It is a decentralized digital currency without a central bank (does not require a central authority) or a single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. The currency's state is maintained through distributed consensus. The first-ever decentralized digital currency is the Bitcoin.

Bitcoin can be transferred from one user to another using the pair-to-pair bitcoin network, blockchain. Still, the term ‘bitcoin’ refers to two entities one is the bitcoin digital asset (BTC) which are the actual digital coins used to carry out bitcoin transactions, and the other the bitcoin network which is the blockchain that regulates bitcoin transactions and determines the value per time. Basically, Bitcoin (₿) stands for the bitcoin system or circulation while bitcoin(BTC) usually refers to the cryptocurrency. Investment in Bitcoins is a digital investment that happens on the internet. The blockchain serves as its online ledger which is accessible by all bitcoin users.

Compared to conventional money wire transfer which has a lot of charges attached to them, from currency conversion charges to bank service charges, bitcoin has relatively low transfer charges. If you were to transfer any amount of bitcoin to fiat money (USD, EUR, INR) it would cost you less than $3 unlike regular money wire transfers which can charge you between $3 -$10 per transfer.

How Bitcoin works

Bitcoin works on a digital ledger called blockchain or the bitcoin network which regulates and records all bitcoin transactions carried out on the network. All bitcoin transactions are called ‘blocks’. Once a new block is picked up by the system its activities are disseminated to the rest of the users on the peer-to-peer network. This is done for validation and transparency since the worth of bitcoin is determined by the users. The economist captures effectively the major idea behind bitcoin and how it works, “unlike traditional currencies, which are issued by central banks, Bitcoin has no central monetary authority. Instead, it is underpinned by a peer-to-peer computer network made up of its users’ machines, akin to the networks that underpin BitTorrent, a file-sharing system, Skype, an audio, video and chat service. Bitcoins are mathematically generated as the computers in this network execute difficult number-crunching tasks, a procedure known as Bitcoin “mining”. The mathematics of the Bitcoin system were set up so that it becomes progressively more difficult to mine Bitcoins over time, and the total number than can ever be mined is limited to around 21 million. There is, therefore, no way for a central bank to issue a flood of new Bitcoins and devalue those already in circulation.”

When bitcoins are collected they are stored in what is called ‘bitcoin wallets’ which are similar to saving money in a conventional bank with no bank service charges or deductions. Bitcoin wallets can be installed directly on your smartphone or computer, on installation, a bitcoin wallet address will be created for you which would be used for all your bitcoin transactions. The advantage bitcoin has over fiat money is that it is solely governed by the users and not financial or government organizations of any country. To use bitcoins for a transaction, you will be required to first create your bitcoin wallet then set up a ‘seed’ or private key as bitcoin security.

Tip: Do not save your private key online, preferably write it down on a paper or a book and keep it somewhere safe. There are hackers crawling over the internet who can easily access your ‘’seed’ at just a click if saved online.

Buying bitcoin from different platforms may differ in procedures. Outlined below are the basic steps to follow when buying bitcoin

●     Sign up with a cryptocurrency account

●     Verify the account through your email

●     Activate two-factor authentication (if provided)

●     Select “funding” then “deposit”

●     Choose the preferred currency you want as a payment option

●     Select your preferred transfer method

●     Transfer the funds into your account

●     Search and select your preferred cryptocurrency market

●     Type out the amount you want to buy

●     Review transaction

●     Buy bitcoin

 

Bitcoin history

Bitcoin came to limelight in late 2008 after the Occupy Wall Street scandal of 2008 where banks were accused of misappropriation and misuse of borrowers’ money, therefore, a need arose to have a system where individuals would be in full charge of their funds and assets without the interference with any government or organizational body. The idea behind the creation of bitcoin was to put the users in charge of all transactions, take out the middle man, make transactions transparent, and eliminate interest fees and extra charges. The identity of the founder(s) of bitcoin remains unknown, all that can be related to team or individual is the name ‘Satoshi Nakamoto’. By January 2009 the first open-source bitcoin software was released. (See ‘genesis block’)

 

Bitcoin regulation

Since Bitcoin is solely on the internet, it is not regulated by any country, unlike fiat money. Anyone with god access to the internet can use bitcoin with no “bank charges” or currency conversion rates. This makes bitcoin free from any form of organizational monopoly.

Bitcoin Mining

This term refers to the mathematical calculation carried out by a computer on the bitcoin network or blockchain to secure the bitcoin process by “chronologically adding new transactions (or blocks) to the chain and keeping them in the queue. Blocks are chopped off as each transaction is finalized, codes decoded, and bitcoins passed or exchanged.” New Bitcoins can be generated by solving cryptographic mathematical problems. Mining bitcoins requires a lot of time investment, mathematical and technical skills. Besides using fiat money to buy Bitcoins, you can get Bitcoins from mining them. Incentives are being granted to successful miners who solve complex problems or puzzles as a form of encouragement. Mining Bitcoins may be a little daunting for the first few times. To set up a mining rig and become a Bitcoin miner requires that you get a graphics processing unit, GPU or an application-specific integrated circuit, ASIC. Another function of Bitcoin miners is to do the work of financial auditors, thereby, auditing the Bitcoin network for transaction verifications and avoidance of double-spending (an illegal spending of a particular bitcoin twice), “there is a risk that the holder could make a copy of the digital token and send it to a merchant or another party while retaining the original.”

 

Things to know about Bitcoin when Getting Started

Always Secure Your Wallet

When it comes to Bitcoin wallets, two measures are provided to the user concerning security keys. The wallet provider can either function as a bank and help you keep their keys (which may put you at their mercy should anything go wrong) or let your handle your keys yourself (which is a better option). The implication to privately holding your keys is that no one else can access them without your permission, and no one else can help you remember them if you forget, so NEVER FORGET your keys!

Bitcoin Value is Unpredictable

Bitcoin value is subject to the laws of user supply and demand. Bitcoin has a life-time limited supply of 21 million, therefore there would always be an increase in demand so long as more people use Bitcoins which would increase the value in turn. Once it reaches its 21 million supply limit, there are more chances that Bitcoins would become a scarce commodity thereby increasing its value even more.

Transaction Transparency

Part of the reasons for creating the bitcoin network is transparency. That way anyone on the platform can see the transaction history of other users as all bitcoin transactions are stored permanently on the network and made public for all to access. The transaction history only reveals the user’s bitcoin wallet address without disclosing the true identity of the user

No Sole Administrator

The beauty of Bitcoin is that it is independent of any sole administrator which means that no authority or organization can influence or determine the value of Bitcoin and how transactions are carried. However, the implication of not having a central authority is that swindling cases cannot be reported to any government agency, hence the need to carefully secure all important details. That is, do not save your seed or bitcoin key online, don’t send your bitcoins to untrustworthy people over the internet, don’t keep your bitcoins in the care of unverified and untrustworthy people.

Taxes and Regulations

Though bitcoin is independent of a central bank or sole administration, it is still required of its users to adhere to taxes and other related regulations in individual user countries. Taxes are required to be paid on anything that has value sales, payroll, income, revenue, and bitcoins.

 

Investing in Bitcoin

Investments are embarked upon solely for futuristic profiting or benefits. It is the outlaying or disbursement of money or other resources usually for income or profit. Characteristics of investments are that they either result in a gain or loss for the investor and no one likes to lose. Therefore, every investment that will involve the release of certain forms of resources should be sourced after for information and deep understanding of the investment system else an impending loss awaits the ignorant investor. This is the same for the Bitcoin, herein are some details (what, where, why and How) every investor with an interest in bitcoin needs to know.

It is important to note that there are two forms an investment can take, the learning Investor and investment by proxy. The learning investors are the real investors as they gather much information about the subject matter, accept trainings (from experts) in the art of trading their assets and keep learning all the way while the investor by proxy uses an agent(expert) or automated systems to carry out their investments, they may have little or no information about their investment systems

Unlike the foreign exchange the cryptocurrency experiences periods of sudden and instant fall or rise called 'dump or pump'. There are various conditions responsible for a profitable adventure in the bitcoin or cryptocurrency investment at large, most important is the training possessed by the investor and this could cover the fundamental, technical or advance training or better still all the above. The level of training mastered is the length to which profit can be made in the cryptomarket. Bitcoin takes time and effort to understand how it works.

Things to Know Before Investing in Bitcoin

Bitcoin offers a good investment opportunity as one Bitcoin can worth hundreds of dollars depending on its value at the time. Its limited supply makes it more valuable just like gold, the more bitcoins are mined the more their overall quantity is reduced and in turn, they become scarce and expensive. Other features of investing in Bitcoin are:

●     Transparency; all bitcoin transactions are made public for all to see. It also reflects the worth of Bitcoin based on other users’ transactions per time.

●     Sound and predictable monetary policy; encourages cross-border payments at lesser or no exchange fees independent of government monetary policies in different jurisdictions.

●     No fixed Bitcoin price; there is no official Bitcoin price as the prices are influenced by supply and demand, how much users are willing to pay for a Bitcoin per time.

When to Buy Bitcoin?

Just like the stock exchange or foreign exchange, Bitcoins also increases in value at a fast pace and is followed by a slow downturn in its prices until it stabilizes again. As an investor, you can make gain by targeting the value increase season of Bitcoins by timing the market based on past transaction patterns. You can use tools like Cryptowatch or Bitcoin Wisdom to analyze charts and Bitcoin transaction history.

 

Securing Your Bitcoins

So much emphasis is laid here since Bitcoin is independent of any official regulatory body it means that in the case of theft or account hacking there’d be no legal body to complain to. Securing your Bitcoin account is a big responsibility and a price to pay for privately overseeing your finance. There are thieves, scammers, and hackers on the lose seeking out ways to hack your account. The Bitcoin network is very secure, but the Bitcoins are only as secure as the wallets that hold them. When choosing a Bitcoin wallet to register with, it is best to carefully look out for the ones that are more security conscious, especially the ones which generate your Bitcoin keys offline.

 

Bitcoin- training

Bitcoin like the stock exchange market requires details in form of learning to understand how the market works. BTC training is a learning process that allows those who want to are interested in Bitcoin to receive the skillset required to make their investment rewarding.  It involves the fundamentals or basic which has to do with the acquisition of history, news and information that can help, the technology has to do with digital a market option while the advanced training helps an investor to go even deeper into learning how to write programs, predict the pattern of crypto-system and train others. Cryptocurrency training does not usually go for free, it is a specialty that requires expert hence, can be very expensive.

Why Bitcoin?

There are only 21 million Bitcoin, and as time goes on, they become scarce and harder to mine but very useful. It is possible to see when new bitcoins are created or how many bitcoins are in circulation thus Bitcoins provides sound and predictable monetary policy that can be verified by anyone. Bitcoin supports cross border payment without bothersome government policies and also cannot be blocked or interfered with by anyone. It is censorship-resistant. Global economic and political issues are often affecting the price of BTC. Local issues in a country may not actually affect its price. Bitcoin’s price is set by whatever people are willing to pay (depends on the agreed exchange rate). It is usually expressed as the cost of a bitcoin.

How to Invest in Bitcoin?

Investing in BTC is a rather serious business and securing your investment should be your top priority. This can be done by using systems of holding it secure against hacking or stealing. The Bitcoin systems are secured but the coins themselves should be stored in this secure holding called 'wallets' and must be in your control. Developed countries offer access to operating with Bitcoins with many options and easier exchange means.

To buy and sell BTC a brokerage house and account needs to be opened by an investor. Coinbase is the world’s largest bitcoin broker and available in the United States, UK, Canada, Singapore, and most of Europe.

Conclusion

Do not jump into this investment without proper guidance or expert training. Bitcoin is a fast-growing coin and it can take a while to understand the true impact Bitcoin can have on the world economy. Take some time to understand Bitcoin, how it works, how to secure bitcoins, and about how Bitcoin differs from conventional means of exchange (fiat money).