If you’ve been following the media for the last couple of months, you must’ve come across some form of news about Bitcoin at least once. The huge surge of value this cryptocurrency has experienced means that a lot of people are now interested in investing in it, even if they never even approached the market. This Bitcoin craze is global, as the value of the coin increased about 20 times in 2017 alone. If you still haven’t joined in on the action and want to know as much as possible about this, you’re at the right place. What is Bitcoin and how does it work? That and all other basics will be discussed in this article. Read on and find everything out!
If you’re a complete beginner in this area, we think the best way to start things off is to provide you with a Bitcoin definition. You may have noticed that we called it a cryptocurrency in the introduction. What does that mean? Well, it means that it is a purely digital (or virtual) currency secured by cryptography (hence the name cryptocurrency), i.e. encryption. It is based on the so called blockchain technology which is used to keep track and verify all Bitcoin transactions. In other words, there are no physical bitcoins – the only way to earn them and use them is via the internet.
What made it so special when it first came out back in 2008 was the fact that it is completely decentralized. This means that no institution, like a central bank or something similar, is controlling it. There is simply no need for that, precisely because blockchain technology is its foundation. Through it, everything is completely transparent and easily traceable, with the whole community making sure there is no funny business. But this is just the tip of the iceberg when it comes to basic Bitcoin information, so keep reading!
You may also be wondering who created Bitcoin and how this cryptocurrency came to be. Well, this is probably the greatest mystery of the cryptocurrency world. What is known is that the person responsible for creating the coin is Satoshi Nakamoto, but nobody knows who this individual really is. The name seems to be a pseudonym, and it is quite possible that the person behind it isn’t actually Japanese. We don’t even know if the person is a man or a woman, for that matter.
What we do know is that Satoshi Nakamoto published the whitepaper called “Bitcoin: A Peer-to-Peer Electronic Cash System” which defines how this currency is supposed to work and how involvement of any third party into the transactions can be avoided. This is pretty much the Bible of Bitcoin, the seminal work of today’s most popular cryptocurrency. Satoshi Nakamoto even created the first cryptocurrency software client in 2009, but after that he (or she) became less and less involved with the project and eventually confirmed that he will be focusing on “other things”.
Let’s now get back to the coin itself. You know what it is and who created it, but how can you earn bitcoins? Well, there are several ways to do that. However, you need to be aware of that this cryptocurrency cannot be pumped out indefinitely until the end of time. The maximum number of these virtual coins that can ever exist is 21 million, although each bitcoin is divisible down to one Satoshi (0.00000001 BTC).
So, how to get bitcoins? Well, the most straightforward way is to buy them (or at least a fraction of a bitcoin) through various websites known as cryptocurrency exchanges, but some brokerage companies offer this option, as well. You can usually buy bitcoins in a variety of different ways, including PayPal, credit cards etc, which essentially means exchanging your fiat currencies for them (expect a certain fee for every transaction, though).
You can also earn bitcoins if you’re a merchant who wants to offer additional options to your customers or if you get a job that pays in bitcoins. It is very easy to introduce bitcoin payments onto your website and set everything up so that a bitcoin to USD or EUR conversion is immediately executed for you. Bitcoin merchant accounts can help you with that, but there are many different solutions for this out there. In any case, if you have a business, adding this feature to your offer can be a great move. More and more companies are going for it nowadays.
Finally, there is also the process called bitcoin mining. This, however, demands a paragraph of its own, so keep reading and learn how new bitcoins are created.
So, what is bitcoin mining? Well, it is the way by which new bitcoins are introduced into circulation, but also a way by which the network’s overall security is maintained. You see, through its mining all bitcoin transactions are verified in order to make sure no user can spend the same coin twice. Once a miner completes a package of 1 MB, they can win a prize, which at the moment stands at 12.5 BTC (the official abbreviation of bitcoin), but to do that they also have to solve a mathematical problem. They have to find the right hexadecimal number of 64 digits (also known as hash), and they have to be the first to do so. Only the first miner who does so will receive the prize, and thus new bitcoins will be released into circulation. This prize is halved approximately every four years.
Given the sheer size of the hash, there is a huge number of possible combination, so computers are used to find the solution. In the beginning, you could mine bitcoin with your average desktop computer, but as more and more bitcoins are mined, the difficulty of mining them increases, which in turn increases the amount of electricity and computing power needed. This is why specialized mining rigs are often used by those who want to do this for a living, and why many bitcoin miners join what is called Bitcoin mining pools. These pools are essentially groups of people all working on mining bitcoin, and when one of them wins the prize, they all get a share. With that out of the way, let’s move on to other important issues. Stay tuned!
In order to send bitcoins, receive them or manage them in any other way, you will need a bitcoin wallet. This is something you simply cannot do without because this is where you will be storing your cryptocurrency. Each wallet can have one or more private keys, which act as a kind of password for your wallet – if you don’t input them correctly, you won’t be able to use your bitcoins in any way. That’s why storing these keys safely is of outmost importance. Another thing the keys are connected to is your bitcoin address. Now, these addresses are essentially linked to your wallet you give to people from who you want to receive payments. They then input that address and send bitcoin to you. Kind of like your e-mail address, but here you can very easily create multiple addresses for a single wallet.
Wallets come in several forms: desktop, mobile, web, hardware and paper. Desktop wallets are essentially apps you install on your computer, while mobile wallets do pretty much the same, only for mobile devices. This can give you a lot of flexibility and a way to react almost immediately if you need to make a transaction. Web wallets are wallets on specialized websites, and for all these options you have a whole lot of reliable choices out there. Hardware wallets, on the other hand, are perhaps not that popular, as they are separate pieces of equipment and maybe not as simple to use because you always need a computer nearby and an appropriate website.
All those bitcoin wallets, however, are subject to technical malfunctions or even hacks. Paper wallets solve those problems by simply putting all the necessary information for your transactions on a piece of paper. You can even print out a QR code which can then be scanned easily to send or receive bitcoins. However, paper does have its limitations – it is susceptible to the elements, will deteriorate slowly and can even be relatively easily lost if you’re not careful. So, analyse what you need in terms of security and then make your choice.
And now, probably the main reason why you’re here if you’re a beginner – bitcoin price. As mentioned in the introduction, 2017 saw this cryptocurrency rise sky-high, with its value reaching more than 19,000$ per coin at one point. Given that the price at the beginning of the year was slightly below 1,000$, you can see why people went absolutely crazy about this type of investing and why the whole cryptocurrency industry has come to the fore.
However, don’t think that profit is guaranteed as soon as you invest in this. Bitcoin price can be extremely volatile, with swings of even beyond 30% in just a couple of days. Therefore, if you’re hoping for a quick buck, the market can easily turn against you, especially now when the success of the coin is not that big of a news anymore. Still, given that bitcoin futures were launched relatively recently (about mid-December 2017) and that exchanges are starting to accept bitcoin as a viable choice, it is reasonable to assume that bitcoin price will continue growing in the long run. The fact that bitcoin is now present in reputable financial institutions raises the legitimacy of this cryptocurrency, but also of many others.
At the moment this article is being written, the bitcoin to USD conversion rate is slightly above 13,500 dollars per bitcoin, which is a pretty good example of the volatility we talked about earlier. Don’t panic when something like that happens because drops like that were expected, given how big the boom was. Keep track of the situation and remain cool. More tips on that can be found in the next paragraph.
A big part of trading is staying in touch with the latest developments on the cryptocurrency market. That’s why it’s important to follow bitcoin news regularly on specialized websites like this one. Its value depends on many factors, especially now when it’s a part of mainstream trading, and it can be influenced from any part of the world. Maybe a country introduces new regulation, maybe a big company starts to accept bitcoins as a payment method for their products or services… anything like that can have a huge impact, so you need to be aware of it all. This is particularly true if you’re not planning to make any long-term investments – bitcoin news become even more important then.
Additionally, if the US dollar changes value, that also affect the bitcoin to USD conversion, so you can see how intricate the whole thing is. With that, we think we can wrap things up here. Stay for a short conclusion.
To summarize, this is the main cryptocurrency on the market right now, with by far the biggest price of all virtual coins. Its creator is a person known as Satoshi Nakamoto, although the real identity of that individual was never determined. Bitcoins can be acquired by exchanging fiat currencies for them, i.e. buying them with regular money, by receiving them as payments for goods and services or by bitcoin mining. However, before you are able to send or receive bitcoins, you will need to open your cryptocurrency wallet. There are several different kinds of them, with loads of reliable companies providing the service you need, so browse around a little to find the right one. Do not forget that bitcoin price (usually expressed as bitcoin to USD ratio) is extremely volatile these days, precisely because so many people are hopping onto the bandwagon. We strongly suggest following all relevant bitcoin news if you want to be able to make the right decision at any time. This website can help you with that a lot, so check out our other articles, especially if you’re a beginner. You are sure to find a lot of interesting stuff. Good luck!
Details not provided. This is demo widget.
Cryptotradingreview.com has made every reasonable effort to make sure the information provided on this website is accurate. Be aware, however, that this information is subject to change and as such may not always be completely accurate. Everything you read here should be treated as an opinion expressed by the author and not as an incentive to invest in a particular project or execute a trade in a particular manner.
Cryptotradingreview.com is also not liable for any losses that may occur as a consequence of using this website or information found on this website. Cryptocurrency trading comes with a considerable risk and is not suitable for everyone.
Cryptotradingreview.com may also have a financial relationship with companies, products and services represented on this website. We may be financially compensated if our readers decide to click on links on our website and sign up for the aforementioned companies, products and services.
The owner of this website is Next Media Corp.