Bitcoin might be the most talked-about currency globally, but it remains an enigma to many. We want to change that. Everything you need to know about Bitcoin is here. Bitcoin is a complicated, fascinating, new-age currency that exists only online and allows the user to be anonymous.
If you’ve never heard about Bitcoin, you’re probably thinking it sounds a little suspicious and dangerous. Even if you have ever heard about it, you probably feel the same thing. We are here to answer some of the questions about Bitcoin.
It’s much more complicated than today, but these are the basics.
What is Bitcoin?
Bitcoin is a computer file stored online in a digital wallet app on smartphones. People can send them to you, and you can send them to others. Each transaction is stored on a public list which is called the blockchain.
Bitcoin, unlike a traditional currency, is:
- Decentralized—no government controls the supply of currency.
- Digital—The money lives entirely online, tracked by blockchains, continuously growing groups of records that provide a complete history of each Bitcoin. There are no physical Bitcoins or Bitcoin bills.
- “Pseudo-Anonymous”—Bitcoins are tied to a digital wallet ID rather than your personal information, but this doesn’t make it entirely anonymous.
Bitcoin was developed in 2008 by “Satoshi Nakamoto” with the pseudonym. This person published a paper on how Bitcoins could work, and just a year later, they started trading and mining.
The reason people are so hooked to Bitcoins is the lack of middlemen and banks with hefty fees. Since it exists online, your e-wallet ID is used in transactions, not your name and other information, unless you give it.
Is Bitcoin anonymous?
No, Bitcoin isn’t completely anonymous. Talented hackers and government agencies have to track many things, including Bitcoins. Although Bitcoin transactions are transmitted over the peer-to-peer network, this system doesn’t always hold up.
Suppose a hacker can connect multiple nodes to the Bitcoin network. In that case, the data collected from the different nodes is enough to determine where the transactions are originated.
Suppose the real identities are combined with the Bitcoin somehow. It includes the address from where the money is deposited or withdrawn and exchanged or wallet.
How do you get Bitcoin?
You can also buy Bitcoin with cash.
You can buy bitcoins with cash, cards, and wire transfers. But first, you’ll have to establish a bitcoin “wallet,” which will be your wallet ID is derived from. This is used to store your bitcoins, just like your wallet holds your cash and credit cards.
According to this article on the cryptocurrency website coindesk.com
Each has its cons and pros, but the first two have the most drawbacks. You’ll have to regularly back up your computer if you store bitcoins on your computer. Online services are susceptible to hackers.
If you are a regular user, then online services are the best option. You don’t need complete anonymity and don’t mind about the procedures. However, some of the peoples believe that this erases the point of Bitcoin.
Here’s the list of the major wallets and exchanges across the world.
You must be wondering how much a single bitcoin is worth. That’s a trick question to answer because it fluctuates constantly. At the writing time, Bitcoin is $10,350 US dollars worth.
You can also “mine” Bitcoin.
Bitcoin mining is like digging for gold—hence the reason is called “mining.” With paper money, a government decides when to print and distribute money. However, Bitcoin allows anyone to start mining because it doesn’t have a central regulator.
Bitcoin uses special software to solve math problems and is issued a certain number of Bitcoins to solve them correctly.
These puzzles aren’t easy to solve and, as I said above, do require special software. It is so complex that many people can’t complete it on their own. “Mining” has arisen, where groups split their computing power. Once the puzzle is solved, the winnings are divided on the computing power each contributed to the calculation. I don’t think that mining Bitcoin is an easy way to get rich. It’s possible you would need to spend more on specialized computer equipment than the Bitcoin you could mine would be worth!
Is Bitcoin mining legal?
The bitcoin mining process may sound illegal, but actually, it is not, at least in the United States. The laws regarding digital currencies are different in different countries and are still under development. The use and distribution of Bitcoin are not regulated and are still reasonably risky, especially when it comes to taxes.
But the main issue that arises is when people make purchases using Bitcoins.
How can you use Bitcoin?
The U.S. Treasury Department’s Financial Crimes Enforcement Network states that, as of 2013,
“…using bitcoin to purchase well-natured goods and services is not illegal. However, those who mine bitcoins and trade them for traditional currency or operate exchanges on which bitcoins are bought and sold are labeled “money transmitters” and could be subject to special laws that govern that type of activity.”
Many people use bitcoin to make purchases on the dark web, and that does not constitute legal. Drugs and Gambling are among the most popular uses of bitcoin.
So, where can you use Bitcoin legally?
You can use Bitcoin in more places than you’d think. For example, Microsoft, Dell, REEDS Jewelers, and a few airline sites accept Bitcoin as a legitimate payment.
The easiest way is to get your bitcoin turned into cash via the purchase of gift cards. Many companies allow bitcoin to purchase gift cards, and those cards can be used later to make actual purchases.
Is Bitcoin safe to use?
Nothing is safe in today’s world, not even a President. Just like thieves try to steal your wallet, the hackers are after your bitcoins. It is advisable to use bitcoin wallets to store your bitcoins securely.
For example, Ledger is a Bitcoin security company that offers a range of Bitcoin storage devices. The Ledger Nano S is its most secure wallet now.
TREZOR is another option. It’s the original hardware wallet that was built to secure bitcoins. It generates your Bitcoin private keys offline.
Should you invest in Bitcoin?
Now we have explained the basics of Bitcoin, and you may be a thing if it is safe to invest in Bitcoin. There are a couple of things that need to be cleared before diving into a Bitcoin purchase.
1.Mining Bitcoin is expensive.
If you’re thinking of actually attempting to mine Bitcoin, you could be spending a lot. Unless you’re a severe computer genius, you’ll need to buy software that will calculate the complex 64-digit codes that lead to a single bitcoin. This software is not cheap—typically, it ranges in the thousands (although there are some sketchy accessible or affordable options). Also, you’ll need to consider the actual cost of Bitcoin, which, as I said earlier, fluctuates constantly. While the price appears to be climbing, who’s to say it won’t suddenly decrease in price again.
2.An agency does not regulate Bitcoin.
If you want to invest some of your savings into Bitcoin, know that it’s not like investing in the stock market, and owning Bitcoin is not like having cash in the bank.
Bitcoins are not traded on Wall Street and can’t be bought or sold through a brokerage. So everything is up to you. Due to its unregulated nature, Bitcoin constantly fluctuates in price, more so than other currencies. There are undoubtedly many safer investments than Bitcoin that you should consider if you’re risk-averse. It also has no tangible value like gold. Therefore, Bitcoin is worth exactly what people perceive its worth to be, which can be scary.
3.Demand is high
Since there is a limited amount of Bitcoin, and after 2040, no more will be created. Getting in on the ground floor can be a great idea (not to mention, it’ll help diversify your portfolio).
It has also been rumored that Bitcoin will someday (and maybe even someday soon) be bought by governments to be held as reserves just like gold. While this could have many negative ramifications, it also means the limited Bitcoins would suddenly be in very high demand.
Buying and holding Bitcoin
Buying Bitcoin and holding onto it in hopes it will appreciate is the most common form of “investing.” As with all investing, you should never invest more than you are willing/able to lose. This is especially true with Bitcoin since it’s still a precarious investment.
The most important thing to keep in mind when buying Bitcoin is to make sure to buy only from exchanges that have proven their reputation.
Another critical tip is to make sure you don’t buy all of your Bitcoins in one trade. Instead, use a dollar-cost averaging method—buy a fixed amount every month, week, or even day throughout the year. This ensures that you accept the most Bitcoin when it’s on the rise and less when it’s going down in price.
Bitcoin alternatives
Although the most well-known, Bitcoin isn’t the only cryptocurrency. Let’s take a look at some of the other major players.
Ethereum
Unlike Bitcoin, Ether can only operate through its network—Ethereum. There is a limited amount of Ether that was generated during their 2014 “presale.” Sixty million were created during this time.
Ether is not necessarily intended for day-to-day use like Bitcoin. Application developers can use it as a currency on the Ethereum network. It’s used for things like investments and betting.
Price at publishing: $473.90
Litecoin
Litecoin, as its name suggests, is a simple form of Bitcoin. Anyone can mine Litecoin using their home computers. According to their site, Litecoin is “a peer-to-peer currency that enables instant, near-zero cost payments to anyone in the world.”
Like Bitcoin, you can get Wallets for your Litecoin to keep it secure from hackers.
Price at publishing: $97.22
Summary
Bitcoin has become increasingly popular due to its relative anonymity—which allows for legally questionable purchases. But it can be used for everyday, legal purchases as well. Via gift cards and “wallet” exchanges, can buy items for Walmart or Amazon, and even purchase discount plane tickets. Cryptocurrency is also becoming a mainstream investment option that the average investor has to note.
