What is Bitcoin – Everything You Need to Know

Bitcoin is the first decentralised digital currency in the world. The Bitcoin network is not controlled by any government or financial institutions like banks for example. The transaction is recorded in a blockchain – technology that records all the operations carried out on a given network.

All you have to do is access your computer and you can already use the BTC crypto capability.

How is Bitcoin made?

Where is the Bitcoin coming from and all the other cryptocurrencies? When it comes to paper money most countries have central banks that print and distribute the banknotes each nation use. Sometimes the money supply increases faster than the growth in real output then inflation will occur. This is because there are more money chasing the same number of goods.

Most cryptocurrencies are different because they don’t have a central authority. Given that bitcoins can’t be printed like fiat currency, the only way to create more coins is to ‘mine’ for them. The crypto miners are using high-end computer hardware to solve complicated mathematical problem. These problems are created by a cryptographic hash function that takes input data of any size, performs an operation on it, and returns output data of a fixed size.

The incentive given to miners are new coins as a reward for the contribution of their compute resources. Every time a miner solve one of these mathematical problems and adds a block into the blockchain he is rewarded with a bitcoin. The current reward stands at 6.25 bitcoins, or BTC, it was recently reduced from 12.5 to keep a lid on inflation.

Most cryptocurrencies have a maximum amount of coins that can be mined. In the Bitcoin’s case there can only be 21 million coins.

The miners are effectively taking care for the security of the network by validating the transactions.

Who created Bitcoin?

In October 2008 one man or a group of people under the name of Satoshi Nakamoto published a document describing the bitcoin. The paper was called Bitcoin: A peer-to-peer electronic cash system.

In January 2009, Nakamoto released the first Bitcoin software which gave the start of the Bitcoin blockchain. Nakomoto left the the project in 2010 without revealing his or their identity but the foundation was already laid

The Bitcoin community grew rapidly. Every change in the Bitcoin protocol is public and visible to everyone.

How does Bitcoin work?

When one person pays another for goods using bitcoin, computers on the  the Bitcoin network  race to  verify the transaction. In order to do so, users run  a program on their computers and try to solve  a complex math problem, called a ‘hash’. When a computer solves the problem by ‘hashing’ a  block, its algorithmic work will have also verified the block’s transactions. The complete transaction is stored publicly as a block on the blockchain.

It’s almost like a public book or a collection of financial receipts – everything is transparent.

In the world of cryptocurrency the money is transferred from one address to another.

What about my security?

Bitcoin is encrypted and transparent. All transactions can be seen and are available to the public even if the people involved are anonymous. That means practically no once can cheat, scam, or fraud  the system.

Buying Bitcoins – where do we start?

The first step is to get to know the cryptocurrency market. Are you looking for a long term investment? Think about the amount of money you are willing to invest and where to buy it?

It is not necessary to buy a whole bitcoin. The smallest unit of the bitcoin currency recorded is satoshi (0.00000001 BTC).

The golden rule is: Never invest money that you can’t afford to lose. 

Here are the 3 main steps when it comes to investing in Bitcoin

Step One: Get a Bitcoin wallet

Step Two: Connect to Bank Account

Step Three: Join a Bitcoin Exchange – Bitcoin exchanges are online marketplaces where you can trade bitcoin for  traditional currencies, say BTC for USD.

Where can you spend your Bitcoins?

With the growing popularity, bitcoin has gained acceptance in a lot of industries. You can buy goods and services from all around the world. Food, cars, electronics, plane tickets and many more.

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