What is Bitcoin ($BTC)? A new digital gold of 21st century, basic explanation
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The first widely-adopted cryptocurrency in the world. Bitcoin enables users to safely and directly send digital money over the internet. The trend of investing in “Digital Assets” has grown in popularity and has piqued the curiosity of a large number of individuals. However, because it is a new financial asset, it is vital to conduct thorough research before investing.
What is digital assets?
Digital assets are digital representations of a wide variety of physical items and their related values. They are files created electronically, and that exist as data held on a digital storage drive or computer system. Owners can issue and transfer without the use of paper documents. Documents, music, video, logos, websites, and Bitcoin are all examples of digital assets.
What is blockchain?
A blockchain is a growing collection of records known as blocks that are connected together via cryptography. Each block includes a hash code of the previous block, as well as a timestamp and transaction data. Because each block contains information about the one before it, they create a chain, with each new block strengthening the ones before it. Each transaction is validated independently by peer-to-peer computer networks, time-stamped, and contributed to a growing data chain.
Because data cannot be changed without the approval of a quorum of the participants in a blockchain system, fraud and data tampering are avoided. A blockchain ledger can be shared, but it cannot be changed. If someone tries to change data, all participants will be notified and will know who attempted the change. There are now at least four types of blockchain networks:
- Public blockchains: a blockchain network is one in which everyone may engage freely. The majority of cryptocurrencies are decentralized and operate on a public blockchain that is governed by rules or consensus algorithms
- Private blockchains: a blockchain lets business owners set rules about who can access blockchain data. Only people who have been given permission can access certain types of data
- Hybrid blockchains: a blockchain combines the advantages of centralized and decentralized systems
- Sidechains: a term referring to a blockchain ledger that operates concurrently with a primary blockchain. The major blockchain’s entries can be connected to and from the sidechain, allowing the sidechain to operate autonomously of the primary blockchain
Bitcoin is a decentralized digital currency that enables direct purchase, sale, and exchange without the use of an intermediary such as a bank. It was the first cryptocurrency, launched in 2009, and remains the most widely traded. It has a maximum supply of 21 million coins, and that is the only amount that will ever be available.
Each and every Bitcoin transaction is recorded on a public ledger that is visible to everyone, which makes transactions difficult to reverse and impossible to fake. Since its public launch in 2009, Bitcoin has risen dramatically in value. Institutional investors began to regard it as a form of digital gold in order to protect themselves against market volatility and inflation.
Where does it come from?
Satoshi Nakamoto – commonly thought to be a pseudonym for an individual or group of individuals whose specific identity remains unknown – created Bitcoin. Hal Finney, a programmer, was one of the first adopters, contributors, and receivers of the first $BTC transaction. Finney downloaded the bitcoin software on its first day of availability and got ten $BTC from Nakamoto in the world’s first bitcoin transaction. Nakamoto is said to have mined 1 million $BTC in the early days, prior to abandoning any engagement with it.
A satoshi is the smallest unit of the $BTC cryptocurrency. According to the software rules, each Bitcoin can be subdivided into a ratio of 100 million to 1, meaning:
- 1 Satoshi = 0,00000001 BTC
- 100 Satoshi = 0,000001 BTC
- 10.000 Satoshi = 0,0001 BTC
- 1.000.000 Satoshi = 0,01 BTC
- 100.000.000 Satoshi = 1 BTC
How does it work?
Bitcoin, like other cryptocurrencies, leverages blockchain technology to provide a level of anonymity and security not possible with non-digital currencies. The Bitcoin blockchain is a decentralized digital ledger that keeps track of each Bitcoin’s creation and transfer. This decentralized and public digital ledger enables anybody with an internet connection to observe the history of any transaction on the network. While the blockchain’s record is completely public, the identities of its users remain anonymous. It works like this:
- People use Bitcoin to buy, send, or exchange bitcoins. The transactions are sent to a lot of computers that compete to be the first to accept blocks of transactions
- Cryptocurrency miners, who hold massive computational power, finish the validation process. Every block validated earns miners Bitcoin
- Miners are responsible for adding blocks to the Bitcoin blockchain. Each transaction is triple-verified by the sender, the receiver, and the Bitcoin network as a whole
The Bitcoin blockchain is regarded as exceptionally safe due to the fact that it is verified by a large number of computers. To have a better understanding of how it works, it’s essential to familiarize yourself with the following words and context:
- Blockchain: Bitcoin is based on open-source code called blockchain, which produces a shared public ledger of transactions grouped into “blocks” that are “chained” together to prevent manipulation. This technology ensures that each transaction is permanently recorded
- Distributed Ledgers: they are databases that are accessible from several geographical locations and are shared via a network. They are held, reorganized, and controlled by individuals called nodes. As they are inherently decentralized and provide a high amount of transparency
- Nodes: the computers that run Bitcoin’s software and help secure the network.
- Private and Public key: BTC wallet has both public and private keys, which function in tandem to enable the owner to initiate and digitally sign transactions, therefore giving proof of authorization
- Miners: Using high-speed computers, miners — or members of the peer-to-peer platform — then independently confirm the transaction, often within 10 to 20 minutes
What are the key features?
- Decentralized: what a blockchain does is make it possible for the data in that database to be spread out across a number of network nodes in different parts of the world. This not only creates redundancy but also protects the integrity of the data stored there. If someone tries to change a record at one point in the database, the other nodes would not be changed and thus would stop a bad person from doing so. This way, no single node in the network can change the information that is stored in it
- Transparency: Due to the decentralized structure of blockchain, all transactions can be observed transparently either via the use of a personal node or through the use of blockchain explorers. Each node maintains an independent copy of the chain, which is updated as new blocks are confirmed and added. This implies that you could trace $BTC anywhere it goes if you wanted to
- Immutability: This is one of the key features of Bitcoin and blockchain technology. This means that transactions are permanently recorded and viewable to anyone
- Hard Capped: Satoshi Nakamoto guaranteed that there would never be more than 21 million $BTC. Along with the halving every four years, intrinsic rarity contributes to the value of each $BTC
- Bitcoin is global: $BTC can be sent across the globe just as simple as cash can be paid in the actual world. It is not closed on weekends, does not charge a fee to access your funds, and imposes no unreasonable restrictions
Bitcoin compared to U.S dollar
The dollar has also been shown to be inflationary. In other words, as time passes, the dollar’s worth decreases as more and more are placed into circulation. Bitcoin has a declining inflation schedule, which means that as time goes on, fewer $BTC are added to the overall supply. This suggests that 1 BTC will become more valuable in the future if adoption continues at its current pace.
How to buy?
The simplest way to get $BTC is through an online exchange. There are hundreds of exchanges available, but as a newbie, you’ll want to choose one that provides simplicity of use while still charging cheap fees and maintaining high levels of security. The following are examples of trustworthy Bitcoin exchanges: Remitano, Binance, Okex, Coinbase, and so on…
The price of a single bitcoin has increased significantly. The price was $1 in April 2011. By the fall of 2021, it had surpassed $65,000 for the first time.
It is a public ledger that keeps track of every Bitcoin transaction. Miners add to the blockchain by using computer processing power to handle complex math problems, which adds to it. The block will be added to the chain if the problems are solved. Bitcoin is given to the miner who correctly solves the puzzle. To begin mining bitcoin, you’ll need:
- Low-cost power supply and mining computers (rigs)
- Software for mining
- Membership in a mining pool
The Buy and Hold method, often known as the “Bitcoin HODL strategy,” is based on the assumption that you would purchase Bitcoin and hold it for an extended length of time. You want to hold on to your Bitcoins for as long as possible so that their value might rise. Having a specific profit goal in mind is the greatest strategy.
Bitcoin trading is how you can bet on changes in the price of the cryptocurrency. This used to be done by buying bitcoin through an exchange and hoping that its price would rise at some point in the near future. Cryptocurrency traders are now using derivatives to bet on both rising and falling prices, in order to make the most of bitcoin’s volatility.
What are the risks?
Investing in Bitcoin, especially when the price of the popular cryptocurrency is increasing, might be an enticing proposition. However, even if it has the potential to be a profitable investment, you should proceed with caution:
- Investment volatility: prices fluctuate rapidly over the last decade. $BTC has been quite volatile, resulting in some fairly catastrophic falls
- No insurance: Federal or government schemes do not cover bitcoin exchanges or wallets. Unlike bank accounts, people are unlikely to recover their bitcoin if anything happens. Numerous high-profile hacking has occurred
- Regulatory restrictions: Bitcoin transactions lack legal protection and are often irreversible, making them vulnerable to fraud
- Limited Use: While an increasing number of businesses are accepting Bitcoin, it is still not widely recognized. Unlike when using a credit or debit card, this restricts where you may spend your money
Although Bitcoin is not the only cryptocurrency available, its market cap exceeds the combined market cap of the top ten cryptocurrencies. Which demonstrates Bitcoin’s significant market influence. It’s also important to learn about these new digital currencies and the technologies they use so that you can understand both the risks and the rewards.
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DISCLAIMER: The Information on this website is provided as general market commentary, and does not constitute investment advice. We encourage you to do your own research before investing.