Did you know that approximately 17% of the US adult population owns bitcoin now? It’s not hard to see how crypto has become mainstream.
There is still much mystery surrounding bitcoin’s origins, from mining to its mysterious creator.
This article will cover everything you need to know about Bitcoin basics, how to start, and the risks involved.
What is Bitcoin?
Bitcoin, also known as BTC, is digital money that can easily be used to secure peer-to–peer transactions over the internet. There’s no need to use a third party intermediary (like banks) to facilitate transactions.
It was established by an open-source community partly due to the negative actions of banks during the Great Financial Crisis in 2008. This involved governments printing money and bailing the financial institutions that caused the crash.
Bitcoin is at its core, allowing users to “be themselves bank”, without the need for permission from companies to make a transaction. There are no restrictions regarding who and how much money a user can send to on the bitcoin network. Also, operations can be done 24/7 and not only during business hours.
Bitcoin allows users to “be your own bank”, but it also “banks those who aren’t banks”, since financial services can be expensive to set up.
There are currently more than two billion people who are not banked, from initial deposits to withdrawals and membership fees.
Bitcoin can be used to store value and exchange money that is only available in the digital realm. Bitcoin cannot be held or seen.
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The Bitcoin network and bitcoins that make it possible were made to be used online. It is not owned or controlled by any company.
What can you do using bitcoin?
- It can be used as money. Bitcoin can be used for purchases by companies like Virgin Galactic and Starbucks.
- You can transfer funds faster and more cheaply. Transferring funds can be done more quickly (peer-to-peer) and without paying high fees. This is possible by removing a third party intermediary such as a bank or payment processor.
- It can be used as a reserve of value. The store of value should have a constant or greater value over time. Bitcoin is sometimes called “digital gold” because it is limited in supply for specific uses. Despite its volatility, bitcoin has appreciated more than 15k% since its conception.
How can you “get” Bitcoin?
- Bitcoin can be bought using fiat currency (e.g. You can buy bitcoin using fiat currency (e.g. USD, GBP or EUR) through a broker or exchange like Blockchain.com.
- You can accept bitcoin payments and sell your product.
- Bitcoin mining can be done with specialized equipment. (Learn more below).
Is it necessary to purchase a “whole” Bitcoin?
No. You can buy Bitcoin fractionally.
If bitcoin’s price is $20,000 you can buy 0.1 Bitcoin for $2,000.
There is a name for the smallest bitcoin unit that can be traded: the satoshi (or sats). One bitcoin unit contains 100 million satoshis.
The price of bitcoin changes with market demand and supply.
Here you can see the live price for a whole bitcoin.
Who invented Bitcoin?
The Bitcoin whitepaper, Bitcoin: A peer-to-peer electronic cash system was published on October 31st 2008 in an email group called the Cryptography Correspondence Group. It was written under the pseudonym Satoshi Nakamoto.
White papers are academic documents that a company or project team creates to explain the entire scope of the product and the problem it solves.
Satoshi Nakamoto’s problem was the 2008 financial crisis and current financial system.
This is what the Bitcoin white paper explains:
“The root problem in conventional currencies is the lack of trust required to make them work
It is essential that the central bank does not debase the currency. However, the history of fiat currencies reveals many breaches of this trust.”
The software was released publicly in 2009 and the Bitcoin network was created.
Nakamoto was active in the project for another year with other developers, but they stopped contributing in 2010. Their identity is still unknown.
Bitcoin is open-source software that allows hundreds of companies, developers and organizations to contribute to its code.
Bitcoin, bitcoin, or BTC.
It can be confusing to capitalize or abbreviate bitcoin. Let’s see what each one means.
Bitcoin:Bitcoin is an acronym for the Bitcoin protocol and network. This is the system on which the bitcoin currency operates.
Bitcoin: The lowercase spelling of bitcoin refers to the cryptocurrency and not the payment network.
BTCBTC refers to the cryptocurrency. BTC is a similar symbol to a stock ticker and you will see it on price charts.
What is the secret to it?
Any computer can access and manage the Bitcoin blockchain from anywhere in the world. The rules that govern the computers running on the bitcoin blockchain make the data (bitcoins), scarce and valuable.
It is possible to produce only 21 million bitcoins per year, which, in the end, gives bitcoin its value.
This is a quick overview of what happens when someone sends bitcoin via blockchain technology.
- A public key is given to anyone who joins the Bitcoin network. This can be thought of as an email address, and a private key can be thought of as a password.
- Every bitcoin transaction, together with the sender’s private key, are recorded on a public blockchain list.
- Bitcoin transactions are validated and confirmed by “mining”, which is the main mechanism.
- The public complete list is then sent to all computers connected to the Bitcoin network.
- This public list contains transactions in chronological order. It is possible to track the history of every bitcoin transaction that has ever taken place. The bitcoin ledger is immune to both censorship and tampering.
This “open” nature discourages or discourages “bad actors” and people from spending coins not theirs, making copies or reverse transactions or buying coins that aren’t theirs.
All transactions made on the Bitcoin network can be viewed on the Blockchain.com Explorer.
What exactly is “mining” bitcoin?
Two processes are required to mine bitcoins:
- Verification of transactions made on the blockchain
- How new bitcoin is put into circulation
Summary: Only 21 million bitcoins are ever produced.
To add to the blockchain, transactions that occurred at the same time are combined into “blocks”.
One “miner” adds a new block to the blockchain each ten minutes. It contains all transactions that occurred between the previous block was “mined”. Once the transaction is added, it is “confirmed”.
What’s the deal for Bitcoin miners?
Bitcoin rewards are a way for bitcoin miners to be incentivised. They can get the following:
- If they are the successful miner who adds the next block to the blockchain
- Transaktion fees for all transactions in the block
Miners must compete to be the first to add the next block to the Blockchain.
The “proof of Work” is the “answer” to the problem and is included in this new block.
The fastest miner adds the block to the blockchain. Specialized computers have very high processing speeds and are used to mine.
Listen to our podcast, “What Exactly Is Bitcoin Mining?” Jaime Leverton, mining farm Hut 8.
Blockchain.com Podcast: Q&A – What exactly is Bitcoin Mining? Jaime Leverton, Hut 8, on…
Mining is one of the most important, but often misunderstood, aspects of Bitcoin. Jaime was our guest on this episode.
Summary: What’s the difference between bitcoin, cryptocurrency and blockchain?
Bitcoin is a cryptocurrency.
Bitcoin was actually the first cryptocurrency ever created. A blockchain is the basis of cryptocurrency, which includes bitcoin.
Since the creation of bitcoin, many new cryptocurrencies were created. Bitcoin is still the most widely traded cryptocurrency in terms of trading volume and market capitalization.
Although Bitcoin is relatively new, it shares many of the same characteristics as money.
Limited supply, durability and divisibility.
Is Bitcoin secure?
Bitcoin uses cryptographic tech, which encrypts information and makes it difficult for unintended recipients.
Bitcoin is not without its risks. Here are some things to be aware of.
- Loss or theft of crypto keys. You can lose your keys as with all crypto self custody.
- A “51% Attack”. This could happen when one miner or mining group gains majority control over the bitcoin blockchain, and “hacks” it.
- Actions can’t be reversed. It is the user who is ultimately responsible for their actions. You can’t undo a cryptocurrency transaction once you have clicked send.
- Unknown regulation. Crypto and bitcoin are currently regulated in some parts of the world, such as the US. However, future regulations could apply to crypto assets.
Bitcoin: Is it the future?
When enough people agree on something being valuable, economic value is created. This principle has allowed money to take many forms throughout history: cows, shells, and rocks.
Elon Musk is one of the most wealthy people in the world. He famously stated:
“Bitcoin’s structure has been very clever. Crypto-currencies can be used to transfer value, unlike paper money.
Since the 20th century, we have moved quickly from a cash-based society, to plastic cards, and then to contactless cards.
Who is to say bitcoin isn’t the next generation of money?