Being a number one trend in the last few years, cryptocurrency and Bitcoin itself readily bring in the new idea of money to the 21st century. “The internet of money” – that’s how they sometimes call Bitcoin. What’s so breakthrough about it, how to acquire some of this digital money, where to store and how to use it? These are the top questions every beginner asks. Find out the answers to them.
What’s the primary thing to know about Bitcoin?
Bitcoin is ahead of any other cryptocurrency, because it is the first of a kind. Satoshi Nakamoto is a well-known name to all Bitcoiners. The name of the one who invented Bitcoin and put it on the internet. The issue is that no one has ever seen him. We don’t know how he looks like, whether he’s Japanese, or maybe it’s not even one person, but an anonymous group of developers. Satoshi Nakamoto still remains a mysterious character who presented a concept that not only changed our idea of how finances work, but also prompt a chain reaction that lead to the emergence of brand new industries where millions of dollars are moving around. So, what is cryptocurrency?
Cryptocurrency is digital money. It has nothing to do with physical money. Having a crypto coin assumes that you have a certain piece of code that guarantees you have a corresponding amount of money to make transactions with. This “piece of code” is your public and private key. Public key is an analogue to your bank card number, so if someone wants to send you Bitcoins he should know your public key. Private key is more like a strong password that allows you to receive and send transactions. It can sound a bit confusing but as soon as you’re into Bitcoin, you’ll get the idea.
Bitcoin’s main underlying technology is called the Blockchain. It plays the most significant role in the invention of the concept of cryptocurrency. Blockchain is a decentralized (no central server) network. You can think about it as a distributed digital ledger in which transactions are “written”. The fact that it is decentralized explains that there is no place where this ledger is kept. The copies are spread among all the devices in the network. The lack of central server makes it impossible to hack the network because there is nothing you could hack. Due to the same reason you cannot rob any vault that keeps all Bitcoins in it, because there is no such.
Similar to gold, Bitcoins are mined. But in order to mine them you don’t need to dig ground. You do another work – solve certain equations. The one that solved it first, gets Bitcoins as a reward. In fact that’s not really you who solves, but your computer. The amount of miners is increasing every year in response to the difficulty of mining. Thus you’ll need more equipment to mine Bitcoins, which is more expensive. That’s why Bitcoin price is growing so intensively.
Note: Over the last eight years the exchange rate has grown more than 800 thousand times.
In the beginning it is hard to get the idea, but in fact you don’t even need to, because it’ll come eventually.
How to buy Bitcoins
In the internet you can find plenty of different ways to buy Bitcoins, but buying them at the exchanges still remains the safest and, what’s very important for a beginner, the easiest one.
It works just like the regular exchange. The only difference is that bitcoin exchanges are found on the web. Basically, these are the websites where you create an account, link the bank card, make deposit and use corresponding services. The easiest way to buy Bitcoins is to go to the buy/sell section of a certain exchange. Bitcoin exchanges work with different local currencies, be it USD, EUR, GBP, etc. Suppose, you are going to buy bitcoin with Euro, you can easily do it in few clicks just having an account and a deposit in relevant currency on the exchange platform like CEX.io, for example.
Today there is a massive variety of exchanges. Due to the lack of regulation, not all of them correspond the necessary level of security. Before choosing one, you should always consider the two most important attributes – how safe and how reliable this particular exchange is. These two factors are usually interrelated. It’s better to overpay fees, but use a trustworthy exchange. It’s all about your money, a wrong decision can cost you a lot.
Talking about the convenience in use, pay attention to the exchanges where you can withdraw funds directly to your credit card:
- It saves your time, because it’s done almost instantly.
- Bitcoin is a currency with high volatility. Although it always tends to increase in price, sometimes the rate can go down. So if you see it, you can always withdraw funds immediately.
Where to store Bitcoins?
How do you think Bitcoins are stored if they don’t exist outside digital world? To store Bitcoins you need to know the private and public keys that imply you have a certain amount of them. This is the main idea of how Bitcoin wallets work. They generate and store these keys. The different kinds of wallets are:
- Web (A website that provides you with a wallet service).
- Mobile (An app for your smartphone or tablet).
- Desktop (A wallet that works as a desktop program).
- Browser extension (A wallet integrated in your browser).
- Hardware wallets. These wallets are safer because all kinds of software can be hacked and your keys can be stolen. Hardware wallet is a physical host that is much harder to hack.
- Paper host. In this way you simply write your public and private keys on a paper and hide it somewhere. In this case the only way to steal your money is to get this piece of paper. It is probably the safest way to keep your Bitcoins.
What to do with Bitcoins?
When you’ve acquired Bitcoins – the main question is “What to do with them”. Here is a map that can show you stores and services that accept Bitcoin.
Generally, there’s no sense in comparing Bitcoin with fiat. It is a young currency and completely different from our habitual idea of money. It would be silly to state that Bitcoins are accepted everywhere just like dollars. They are not. But there is no doubt that the amount of services accepting Bitcoin will become larger.
For now, many people use Bitcoins as a tool to increase their capital. Margin trading, arbitrage, mining – all these are opportunities to earn good money if you’re into it. It would have been impossible to do this with fiat. But possible with cryptocurrency and Bitcoin itself.
There’s no doubt that Bitcoin is a breakthrough financial mechanism. It has only one issue – it is completely different. That’s why the process of exploring it will take some time. The same problem that happened to the internet in the 90’s. Now everyone is able to use it. Bitcoin is next in line!