If you are reading this article on a beginner’s guide to bitcoin it means you can hear more and more about bitcoin and its popularity. Like it will never stop growing. But what is bitcoin and how does it work exactly? In this article, we will cover the most important things about bitcoin itself.
So, let’s start right away.
What is Bitcoin?
Bitcoin is a digital currency that was created in 2009. It is the world’s largest cryptocurrency. Actually, it took bitcoin 12 years to reach 1 Trillion dollars market capitalization. For comparison, it took Apple 42 years and Google 21 years. Not bad for a bitcoin.
Bitcoin is created and stored with the use of blockchain. But what is blockchain? Blockchain is a digital record of transactions. If you look at the name it is easy to remember. “Block” is an individual transaction that is linked together in a single list, called a “chain“. When a new block is added to the blockchain, multiple computers validate that blockchain on the Internet.
What Is Bitcoin Used For?
Bitcoin is a digital currency. Therefore, it is a type of money that is completely virtual. You can use it to buy goods and services. For example, you can buy any product from Microsoft, Overstock, Starbucks, and so on.
Although more and more stores are accepting bitcoin or some other cryptocurrency as a form of payment, not all stores have this option. You can also exchange bitcoin for real cash.
How To Buy Bitcoin?
In a Beginner’s guide to bitcoin you will learn how to buy a bitcoin following these simple steps:
- Get a digital wallet
- Choose an exchange and register
- Transfer funds and buy bitcoin
Let’s go into more detail about each one of these things.
Get a Digital Wallet
The first thing to do is to get a digital wallet. It is virtual storage that holds your cash and credit cards. There are different types of wallets that you can get: Mobile, Desktop, Web, and Hardware.
Web might be the best option if you don’t need complete anonymity and want easy setup procedures. Hardware wallets are considered the most secure as they are usually stored on a USB device or similar hardware.
Some of the bitcoin wallets that you can choose from are Coinbase, Electrum, Binance, Trezor, or similar.
Choose an Exchange and Register
After you have a wallet, you need to sign up for a cryptocurrency exchange that will allow you to buy and sell cryptocurrency. There are many exchanges on which you can do this. Some examples include Coinbase, Binance, Gemini.
It is important to use safe methods when creating an exchange account. Include using a password that is unique and long. Also, include a variety of characters, and two-step authentication.
Transfer Funds and Buy Bitcoin
Once you choose an exchange, you can link a payment option through which you can buy bitcoin and other cryptocurrencies. You can add a bank account, credit, or debit card to do that.
After that, transfer the funds to the exchange. Be sure to check for the fees and time when will your deposit arrive.
Next is to buy bitcoin. Use your cash in your exchange wallet to buy bitcoin. You have to agree on the transactions costs and wait for the transaction to complete.
The last step is to transfer bitcoin to your wallet. To deposit bitcoin into your wallet, you must use your wallet ID and place it in the appropriate field when purchasing.
How Can You Create Bitcoin?
To create a new bitcoin you have to mine them. Bitcoin mining is the process by which new bitcoins are created when computers process complex transactions.
These transactions become increasingly difficult as time goes on to eliminate the emergence of large numbers of bitcoins in the market.
As a reward for mining, bitcoins are created and assigned to computer owners who mine.
A Beginner’s Guide to Bitcoin – Pros and Cons of Bitcoin
There are several advantages and disadvantages of bitcoin, and the most important we will show here
Advantages of Bitcoin
We will first go through the advantages that bitcoin offers us. These are are the potential for high returns, investment diversification, and protection against inflation.
Potential for high returns
Bitcoin is an asset that has achieved significant growth in the shortest time. According to CaseBitcoin, bitcoin has near 200 compounded annual growth rate. This means investors almost tripled their money every year for the last decade.
Given that this property has been in our world for a very short time, no one knows how long it could last and whether such a return will continue
Many investors buy bitcoin instead of gold and thus add another asset class to their portfolio. the reason for this is high return as well as investment protection. Bitcoin has grown by more than 500% in the last year.
Protection against inflation
Some are concerned that the massive printing of money that was present in 2020 will result in a massive fall in national currencies and a related rise in inflation. They suggest that cryptocurrencies might offer protection against inflation.
Disadvantages of Bitcoin
Like any asset class, bitcoin has its downsides. Some of the main downsides are high volatility, the possibility of oversupply of other cryptocurrencies, not regulated.
Volatility shows the price movement of bitcoin. The main reason why bitcoin is so volatile is speculation. Bitcoin is quite popular in the market, and as soon as an asset class is so popular and popular, there is immediate speculation in the market.
The volatility of bitcoin is a negative side because you can buy bitcoin when it has a higher value and then sell it when it falls and make a loss.
Possibility of Oversupply
There is a possibility of developing other cryptocurrencies that will replace bitcoin. Thus, bitcoin could lose in value as investors will always look for better solutions for their investments. Although the number of bitcoins is limited to 21 million, no one can limit the creation of other cryptocurrencies.
The legal status of bitcoin varies from state to state. Although many states approve it for use, many have various restrictions and even complete bans. However, it is a product of the private sector with no official regulation.
This means that buyers of cryptocurrencies are easy to be deceived when there is no regulation. Also, there are many illegal activities associated with bitcoin.
A Beginner’s Guide to Bitcoin – Conclusion
In a Beginner’s Guide to bitcoin, you briefly learned what bitcoin is, how it works, its pros and cons and how to buy it.
To summarize, bitcoin is something new on the market that we are all still learning about. From its inception until today, it has shown sudden growths that have interested a lot of people and speculators. It has also become available in many countries as a payment currency.
The advantages and disadvantages of bitcoin differ greatly from other asset classes.
Blockchain technology is certainly powerful, but whether bitcoin will continue to be the main cryptocurrency is a question. Closely related to bitcoin and blockchain technology are the NFTs I have already written about, and I think it would be interesting for you to read that as well.
What do you think, will bitcoin have more big gains like it has had so far or not?