As Bitcoin becomes more mainstream, more and more people are asking questions about it. What is Bitcoin? How does it work? Where can I use it? This guide will provide answers to all of those questions and more. Additionally, the guide will offer tips before investing in Bitcoin to safeguard your investment. So let’s get started!
What is Bitcoin?
Bitcoin ($BTC) is a peer-to-peer digital currency, meaning that all transactions occur directly between equal, independent network users, with no need for a third party to permit or assist them. Bitcoin was designed to allow “online payments to be transmitted directly from one party to another without using a financial institution.”
Thousands of new cryptocurrencies have been developed since Bitcoin’s inception, but bitcoin (abbreviated as BTC) remains the greatest in terms of market value and trading volume.
Who created Bitcoin?
Despite over a decade of speculation, the enigma behind Bitcoin’s creator refuses to settle down. In 2008, a pseudonymous character named Satoshi Nakamoto published a whitepaper detailing the Bitcoin protocol.
This was not the first idea for digital money rooted in cryptography and computer science. Still, it was a distinctively exquisite solution to the problem of trust building between different online entities, where people may be hidden behind pseudonyms (like bitcoin’s creator) or physically located on the other side of the world.
The article recommended using a decentralized ledger of transactions bundled in batches (called “blocks”) and safeguarded by cryptographic techniques — the entire system was
Since the whitepaper release, Satoshi’s true identity has never been revealed, and the mystery surrounding Satoshi has only deepened over the years.
How does Bitcoin work?
One of the most important components of Bitcoin is the blockchain, which tracks ownership like a bank tracks assets. The Bitcoin blockchain is distinct from a bank’s ledger in that it is decentralized, meaning that anybody may access it, and no one entity controls it.
The Bitcoin network is made up of
a. Miners — who solve complicated puzzles to confirm transactions using the proof-of-work (PoW) method
b. Nodes — which help add transactions waiting to be processed on the network.
Here are some facts about how Bitcoin works:
- Mining rigs are specialized computers that run the calculations necessary to validate and record a new transaction.
- The aggregate computer power of the miners is employed to maintain the correctness of the ever-growing ledger.
- The Bitcoin network operates a continual lottery in which all mining rigs compete to solve a math problem first. Every 10 minutes or so, a winner is chosen, and the winner adds new valid transactions to the Bitcoin ledger.
- As the value of bitcoin has increased, its simple divisibility (the ability to acquire a small portion of one bitcoin) has become an important feature.
- Nakamoto programmed the network so that the total number of bitcoins never exceeds 21 million, maintaining scarcity.
- There are about 3 million Bitcoins available to be mined, which will happen gradually.
What are the use cases of Bitcoin?
Many individuals regard Bitcoin as a store of value that can appreciate in the future. Furthermore, some have compared it to digital gold since it fulfills the same objective as bullion: to keep its worth in US dollars while potentially experiencing price increases. As a result, due to their store-of-value character, Bitcoin and precious metals tend to become more tempting to general consumers, particularly during inflation, which devalues the US Dollar.
However, this story had recently come under significant examination when the United States announced a 7.5% inflation rate in January 2022. Bitcoin’s value has not held up as well as one would anticipate from an inflation hedge.
5 Tips for Bitcoin buyers
If you are planning to invest in crypto for the first time, you must be aware of the new venture you are entering.
Here are some points you should know before you dip your toes in Bitcoin:
1. Look for reputable news sources to stay informed about crypto investment.
2. Crypto investment is volatile and can rise or fall quickly, so be prepared for this.
3. There are many other altcoins to invest in beyond Bitcoin, so explore your options.
4. Understand the difference between hot and cold wallets, and use them appropriately.
5. Stay vigilant when investing in crypto, as there are risks involved.
Where can you buy Bitcoin?
Before buying Bitcoin, it is crucial to set up a digital wallet or Bitcoin wallet. Most cryptocurrency exchanges provide a way to buy BTC and offer a wallet service.
Bitcoin is almost identical to cryptocurrency in many ways. You can buy it on almost any crypto exchange for fiat money and other cryptocurrencies. You can buy and trade Bitcoin from cryptocurrency exchanges like NeoFi, Binance, and Coinbase.
NeoFI is a crypto-investment solution designed to automatically help every scale investor diversify their investment portfolio and risks. NeoFi relies on NeoFi baskets to help investors invest in their preferred niche with a single click.
NeoFI is working to onboard the next billion users to the cryptocurrency space. The project believes that its efforts will revolutionize the world of cryptocurrencies and level the playing field in the market by offering more tools to retail investors in the market. Learn more about the project at https://neofi.app/.