by Alan on 2021-02-13 filed under Crypto for Beginners
For newcomers to the cryptocurrency world, Bitcoin can be a little confusing. What its uses are, where you can buy it and where did it come from are some of the common questions asked by first-time investors.
In this article we will cover the basics of Bitcoin, giving you a crash course on what it is, the history and value of Bitcoin as it’s moved through the years to the present day, your very own Bitcoin 101.
What is Bitcoin?
Bitcoin, in essence, is a form of online currency known as cryptocurrency. It is stored in a digital “wallet” online either on a mobile device app or on a computer. See it as a type of online cash, which you are able to trade and purchase products and services.
Bitcoin is stored as a file and can be traded with others in part or as a whole in relative anonymity. Each Bitcoin has its own unique reference key which is stored as part of a public collective ledger once the transaction has been made. The ledger is made up of thousands of computers all over the world, who run their own separate ledgers. Once a transaction has been recorded on all the computers, the process is complete.
Unlike general banking, Bitcoin is not beholden to the restrictions of a centralized system of banking, essentially making it decentralized, as the responsibility of ownership falls to the collective as a posed to the individual to record transactions.
A Layman’s History of Bitcoin
Bitcoin was first brought to light in 2008 when bitcoin.org was registered, later that same year Satoshi Nakamoto released a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” onto a cryptography mailing list. Early the following year the Bitcoin network went live, with Nakamoto “mining” the first Bitcoin, also known as the “Genesis Block.”
Following this Hal Finney downloaded the software required to mine Bitcoin and earned ten Bitcoins for his trouble from Nakamoto in what was known to be, the world’s first Bitcoin transaction.
There has been much speculation as to the identity of Nakamoto over the years since the first bitcoin transaction, with many believing Finney to be the creator of the currency, however, this has never been substantiated. Nakamoto disappeared in 2010 from the Bitcoin community, leaving in his wake an air of mystery. Although Nakamoto never left a Bitcoin tutorial behind for users, there is a thriving community online centered around the currency.
How Do I Get Bitcoin?
There are a few different ways in which we can use bitcoin as a method of payment but first, we need to find out where we can buy them, here’s a quick bitcoin 101 on where to purchase your first Bitcoin.
You can buy them with real money – You can purchase Bitcoin online using various trading sites as an intermediary. When you have found your chosen Bitcoin exchange, you will need to set a deposit and withdrawal account. Be ready to have your ID documents at hand as your bank may not authorize the use of your bank to withdraw or deposit to Bitcoin sites without you confirming your identity.
You can trade services for them – Sometimes you may be able to use your own skills and services as a way to earn Bitcoin. Often, Bitcoin investors will use their Bitcoins in order to purchase certain products and services so you may be able to find someone willing to trade. When trading services remember that trading Bitcoin is usually anonymous.
You can mine them – You can set up a computer that operates the Bitcoin software, this involves the program repeatedly working out complex calculations, eventually uncovering a Bitcoin. In some cases this is not the most efficient method of finding Bitcoin as for certain users it can be years before you find a single Bitcoin.
How Can I Use Bitcoin?
Over the years, Bitcoin has developed into a well-rounded currency, used the world over for a variety of purchases for both products and services. In this section we have provided a Bitcoin 101 buyers guide, to give you some ideas of what you could buy with your investment.
Store of Value
One popular school of thought is Bitcoin as a store of value, much like gold. The core idea to Bitcoin as a store of value is that Bitcoin will hold its price regardless of what's going on with other assets. Bitcoin has an infinite shelf life and is much simpler to transfer between parties than a ton of gold. This makes Bitcoin a particularly appealing asset for keeping its value.
We will start with the obvious, trading. Trading is definitely one of the more known methods of using cryptocurrency. A word of warning for those who choose to trade in Bitcoin, the market for cryptocurrency is highly changeable, with the value rising and falling dramatically in very short bursts.
The vast majority of Bitcoin buyers purchase them as an investment. Bitcoin levels will decrease over time, with miners finding less than before. Investors will buy Bitcoin when the demand is very low, with a plethora of Bitcoin available on the market the prices are at rock bottom, when the prices are so low you should choose this as a potential time to invest.
Investing is a long game to play, sometimes with years in between purchasing and selling, keep an eye on the market and when you see that Bitcoin is starting to rise in price, there may be a shortage of them, this is the time to consider selling. Think of Bitcoin as any other type of commodity, when there is plenty, the price goes down, when there is less, the price goes up, simple right?
You can invest directly in Bitcoin via a broker like Coinbase or Binance. Or you can invest indirectly via investment vehicles like Grayscale Bitcoin Trust.
Professional Services and Shops
In today’s modern era, certain professional services will now accept Bitcoin as payment for their services. This can include legal firms as well as universities.
Along with professional services, certain establishments such as coffee shops, restaurants, and electronics stores have jumped on the bandwagon and will allow you to pay with Bitcoin.
Why the Sudden Rise in Popularity?
In recent years the popularity of Bitcoin has seen an exponential rise due to a number of factors.
Inflation is partly to blame for this as due to the Covid-19 outbreak there has been a substantial increase in the printed dollar. This, therefore, means that Bitcoin holds its value throughout these times of hardship, ensuring that owners of can expect steady returns on their investments going forward.
Bitcoin is also considered a finite resource. Bitcoin is limited, and therefore, due to its inbuilt code, we know exactly how many there are and how many there will be. Similar to precious stones and gold these hold a value due to their scarcity as a posed to the dollar which is currently being produced on mass.
Risks of Buying Bitcoin
Like any form of online purchasing, there are certain risks associated with purchasing Bitcoin. One of these is as mentioned earlier, the value of the currency can fluctuate with the potential to lose value or gain value.
Another is that you have your Bitcoin wallet access key stolen, this can be prevented by having suitable security measures in place to stop hackers from gaining access to your account. Never give your account key to anyone and keep it in a safe place, away from prying eyes. Remember, this is your monetary investment, you wouldn’t give someone your bank pin, so treat this with the same diligence.
We hope this Bitcoin 101 guide has been of value and highlighted the benefits and costs of investing your money in Bitcoin. Always remember that when trading and investing in Bitcoin there is always a risk that the value will change.
With more and more businesses accepting Bitcoin as an alternative method of payment, there is a bright future ahead for Bitcoin investors and traders in the ever-growing and changing market.
Disclosure: I/we have a long position on Bitcoin. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Big Time Crypto).
Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of cryptocurrency. Investors are advised to review all documents and press releases to see if the cryptocurrency fits their own investment qualifications.