When we dig into the world of bitcoin cryptocurrency it still mystifies millions of people even though bitcoin is widely used now on a global scale. Despite its high profile, especially on forums and social media, many people are still confused by the fact that cryptocurrency isn’t connected to anything tangible in the real world. Bitcoin has become hugely popular and anyone who has invested in bitcoin has compiled a small fortune. Bitcoin is now affecting every aspect of the financial world, including e-commerce businesses. Here is our beginner’s guide to bitcoin cryptocurrency.
Bitcoin was invented in 2008 by an unknown group or person using the name Satoshi Nakamoto. Bitcoin was the first established cryptocurrency. In 2009, Bitcoin became available to the public. The founder of bitcoin wanted to create a new electronic cash system that was decentralized with no central authority or server.
What are Bitcoin and Cryptocurrency?
Bitcoin is a form of digital currency and is a worldwide payment system. Bitcoin is decentralized so there is no government, financial institution, or authority that controls it. Bitcoins are lines of security code that are signed digitally each time they travel from one owner to the next. Account numbers, identifying features, and names are not required and will have no connection with the owners of the bitcoins. A person can buy and sell anything without being traced. Bitcoins are exchanged electronically by users via cryptographic addresses. 3rd party sites called exchanges help facilitate these transactions.
A cryptocurrency is a form of payment that circulates without the need for a central monetary authority such as a bank or government. Cryptographic techniques create cryptocurrencies that enable people to securely buy, sell, or trade them.
The most popular cryptocurrency is bitcoin. According to coin market cap a market research site, more than 16,600 different cryptocurrencies are trading publicly. The total value of cryptocurrencies in 2022 was about $1.9 trillion. There are several cryptocurrencies by market capitalization these include bitcoin, Ethereum, Tether, Binance coin, Terra, and many more.
Other Types of Cryptocurrencies
Cryptocurrency generally falls under 2 categories these include tokens and coins. Both currencies function differently. Tokens are seen as a programmable assets built on an existing blockchain. Tokens allow you to create and execute unique smart contracts. Tokens can represent units of value which include real-world items such as digital assets, electricity, coins, and money that can be sent and received. Coins are intended as a form of currency and are built on their own blockchain.
- Ethereum – Ethereum is like bitcoin that will enable decentralized applications and smart contacts to be built and run without any downtown, control, fraud, or interference from a third party. It is the 2nd largest currency by market cap behind bitcoin.
- Binance Coin – Binance coin trades under the binance exchange and is a utility cryptocurrency. By market capitalisation, it is the 3rd largest cryptocurrency. The tokens can be traded at a discount and as a means of payment.
- Tether – Tether was the 1st cryptocurrency marketed as a stable coin which is known as a fiat collateralised stable coin. The tether is designed to offer transparency, stability, and lower transaction charges to users.
How does Bitcoin Mining Work?
To add a new transaction to the bitcoin blockchain this is known as bitcoin mining. Currently, there are about 16 million bitcoins existing. Bitcoin developers capped the bitcoin quantity to 21 million. Bitcoin miners employ a PoW technique, in which computers compete to solve mathematical problems that validate transactions. The mining process involves a computer solving a challenging mathematical problem that gets more difficult over time. When a problem is solved, one block of the bitcoin is processed, and the miner gets a new bitcoin. To receive the bitcoins the user mines, they must have an established address. The identity of the user is never attached to the bitcoin address.
How to Buy Bitcoin
Cryptocurrency exchanges or bitcoin are good places to purchase or sell bitcoin with different currencies. Coinbase is a popular exchange and cryptocurrency wallet, and both are user-friendly. Bitfinex and Etoro are notable cryptocurrency exchanges in the US and the UK where many people buy bitcoins. With Coinbase, you can use a PayPal or bank account to make a deposit into a virtual wallet. It can take a few days for your account to be funded, once this is complete you can exchange traditional currency for bitcoin. For bitcoin trading on an exchange, registration is the first step and then the user must go through several identity verification processes. Once authentication is successful, the account will be created for the user, the user must then put funds into it before purchasing or selling bitcoin.
The future of Bitcoin
The next 10 years are very important for bitcoin development. At the moment, cryptocurrency is going between becoming a transactional medium and a store of value. Governments worldwide have recognised bitcoin as a viable means of payment for goods. Issues with security and scaling have stopped events from becoming a perfect medium of exchange. Concerns with capital efficiency, security, and custody can be challenging.
The price of bitcoin is highly speculative, volatile, and the cryptocurrency market is largely unregulated. If you are going to invest in bitcoin cryptocurrency you must be prepared to lose your investments and invest at your own risk. The major benefit of bitcoin is it can be withdrawn from any exchange no matter where you are, and it can be transferred anywhere around the world.