After countless conversations with friends, who do dabble in the stock and crypto markets, I realized there’s no one definitive answer for beginners to get started. So, I decided to write this Bitcoin — Complete beginners guide.
Most people you know are probably talking about two things: COVID and cryptocurrency.
And, sure, vaccines are putting an end to the COVID pandemic — but what about cryptocurrency? It seems that it’s not going anywhere, especially if we’re talking about Bitcoin.
So, if you don’t want to be out of the conversation the next time someone brings up the subject, read down below.
This article is a quick five-minute read that’ll put you up to speed on all things Bitcoin.
(*Note — this article may contain Affiliate Links. If you purchase anything after clicking an affiliate link, I may receive compensation)
What is Bitcoin?
Simply put, Bitcoin is a decentralized currency that works on a digital basis. That might seem a lot to take in, but it’s easier to understand if you break it down:
Bitcoin is decentralized, as in, no one person or organization controls it.
Take your credit card, for example. When you make a purchase using it, a centralized entity (Visa, MasterCard, etc.) accepts that transaction.
On the other hand, when you use Bitcoin, no one place confirms your transaction. Instead, multiple nodes (i.e., computers working in the Bitcoin network) analyze the data and confirm the transaction.
If something goes wrong with one node, nothing terrible happens — because countless other nodes are doing the same work.
That means nobody can compromise Bitcoin (unless they own all the nodes in the world). As a side note, you can use your computer as a node!
Bitcoin, apart from being decentralized, is digital. This part is easier to understand: it means there are no coins or bills that count as Bitcoin — because cryptocurrency only exists online. So, nobody can counterfeit bitcoin units.
How does Bitcoin work?
As you know, whenever a Bitcoin transaction takes place, countless nodes around the world work to confirm that transaction. That is as cool as it sounds — but it’s easy to understand as well.
Whether you’re buying something using Bitcoin or buying (or selling) Bitcoin itself, it doesn’t matter, every transaction boils down to this: transferring bitcoin from one wallet to another wallet.
When you transfer bitcoin from your wallet to a second party wallet (or vice-versa), the process to confirm it is simple: multiple computers solve an equation (known as proof of work) to confirm the transaction.
After the transaction is complete, the information goes into the Blockchain (a public ledger where every Bitcoin transaction is registered).
Why do people put computers to work as nodes? Because every time they confirm a Bitcoin transaction, they receive a reward — in bitcoin!
By the way, there’s a difference between Bitcoin and bitcoin:
Bitcoin, with a capital B, is a term used to talk about Bitcoin as a concept
bitcoin, with a small b, is the name of the unit, as in one bitcoin, two bitcoins, and so on
Right now, there are over 18 million bitcoins out there…
So, you know what Bitcoin is and how it works — but, where does it come from?
Well, the answer lies in the nodes. As you know, whenever a Bitcoin transaction takes place, different nodes around the world have to confirm that transaction. And their reward for doing so comes in the shape of bitcoin.
That bitcoin reward is not a percentage of the transaction (as it would be if the people working these nodes took 5% to confirm it); instead, they receive new bitcoin, freshly minted from the source.
How much bitcoin you get for working depends on when you do so. And that is a much more complex issue, something that doesn’t belong in a beginner’s guide.
You probably heard about these nodes in the past. They are also called bitcoin miners.
Learn everything about cryptocurrencies! (*affiliate link)
…and only 3 million more will be minted
Right now, there are 18 million bitcoins in circulation.
You might think that bitcoin miners will keep the numbers growing and growing — but that’s not the case. Bitcoin has a 21 million cap.
After that 21st million bitcoin is mined by someone someday, bitcoin mining will cease to exist as we know it (and miners, instead of getting brand new bitcoin, will get a transaction fee for their effort).
When will be the last bitcoin mined? At this pace, experts estimate that day will come sometime in the 2100s. More likely than not, it won’t be our problem.
Now, think about this: there will be 21 million bitcoins in circulation someday — and billions of people roaming the earth. How much do you think one bitcoin will be worth by then?
Is Bitcoin safe?
Buying bitcoin is completely safe. It’s almost impossible to compromise the Bitcoin protocol.
Remember: for every Bitcoin transaction, countless nodes are working ceaselessly to confirm (or deny) it.
If you wanted to delete, edit, or re-write one of these transactions, you would have to compromise the entire network of nodes.
It’s impossible to know how many miners are there, but estimates put that number in the millions. At this point, compromising the Bitcoin network is too costly for anyone to consider doing it.
These 8 Free Crypto Videos will show you how to get started! (*affiliate link)
How to invest in Bitcoin
There are countless ways to invest in Bitcoin. You can:
- Buy it from a private seller (a friend of yours)
- Look for sellers on a decentralized exchange (also known as peer-to-peer exchanges)
- Buy it from a centralized exchange (such as Binance)
- Mine it using your computer
Here’s the thing: depending on where you live, laws might allow you to buy bitcoin in certain ways and, at the same time, forbid certain others.
The safest way to introduce yourself to the world of Bitcoin is via centralized exchange sites.
After you familiarize yourself with the whole idea, you should try to find ways to buy bitcoin through a decentralized exchange — because that’s the entire reason for Bitcoin to exist, to decentralize finance!
Should you invest in Bitcoin?
Well, it’s hard to say. You shouldn’t gamble your entire life savings in cryptocurrency (Bitcoin or otherwise) because the crypto market is as volatile as it gets.
If you’re thinking about getting into Bitcoin, dip your toes in the metaphorical crypto pool first. Do so with money you can afford to lose.
Bitcoin vs. Forex
As a final note, you should not confuse the cryptocurrency market with the Forex market. The first deals in cryptocurrency; the latter, in foreign currency.
You can make money in either one — but you should do your research extensively before putting serious money into them.
Both markets work with currency, one is digital, the other centralized. In crypto, you can buy bitcoin the same way you can buy euros in Forex.
And both markets work the same way: rates go up and down, and that financial movement can make or break your savings. Trade carefully.
(*Note — this article may contain Affiliate Links. If you purchase anything after clicking an affiliate link, I may receive compensation)
