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Bitcoin (BTC) 101 - Complete Guide

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Author: Benson Toti Updated: January 28, 2022

Bitcoin is a digital currency that was created following the ideas produced by an unknown entity operating under the pseudonym Satoshi Nakamoto in 2009. Unlike with government-issued fiat currencies, Bitcoin is operated by a decentralized authority. It is an innovative concept that is changing how we conduct business in the global markets and governments are now starting to take notice. 

We will be addressing what exactly Bitcoin is and what kind of future it has in today's modern society. By the end of this article, readers will have learned more about Bitcoin and how they can begin making use of this market-leading cryptocurrency.

What Is Bitcoin and Why Was (BTC) Created?

Bitcoin was launched in January of 2009 and has since become the world's largest cryptocurrency. It was founded by Satoshi Nakamoto, although it is unclear if this pseudonym belongs to a single person or an organized group. Bitcoin is a digital currency and differs greatly from fiat currencies that governments issue. Bitcoin is created, traded, distributed, and stored on a decentralized ledger system known as a blockchain. 

The foundation of this leading cryptocurrency is powered by a collection of computers or nodes, which run the Bitcoin code and store transactions permanently on the blockchain. Think of it this way, each block can store a collection of Bitcoin transactions. These records are then stored and visible across all computers connected to the network. No record can be tampered with or altered because the original transaction would still be held by a majority of nodes, which would then correct the discrepancy. 

It was arguably the global economic crisis of 2008 which inspired the creation of Bitcoin. Central banks were caught manipulating the system, carelessly handling borrowers' money and charging extortionate banking fees. The founder aimed to combat these issues and give people power over their own finances through complete transparency while cutting out the middlemen and reducing high-interest rates. The system grants people a sense of security that traditional fiat banking does not. This is because it is nearly impossible for someone to cheat or influence the system as all transactions are transparent and visible to all who use the Bitcoin ecosystem. 

How Does Bitcoin Work?

Bitcoin is one of the first-ever cryptocurrencies that initiated the use of peer to peer technology. This technology allows payments to be made instantly without concern for international borders. Coins are kept in a Bitcoin wallet, which can be accessed using a private key. 

A second, public key is comparable to a bank account number, as this is all that is needed to send money to your Bitcoin wallet. The private key is comparable to your ATM pin and should always be kept secret and safe. You will use this key to authorize payments and transmissions. As you can see, in many ways, the virtual currency system isn't so different from traditional banking practices. 

It is also important to note that BTC operates independently from fiat currency. To clarify, central banking systems release currency at a rate matching the growth of goods while Bitcoin being a decentralized system, sets a rate according to an algorithm ahead of time. 

How is this digital currency actually made? New coins are brought into circulation each time a ‘miner’ secures a new block to the chain. Think of these miners as a decentralized banking authority that oversees and enforce the credibility of the Bitcoin system. Through the solving of complex mathematical problems, these miners validate Bitcoin transactions to the blockchain, incentivised by BTC rewards. 

This blockchain has very strict cryptographic rules that verify and ensure the accuracy of records. When BTC is mined an individual or group will earn a certain amount of BTC. As of May 2020, the mining reward halved from 12.5 BTC to 6.25 BTC; An event that will continue every 210,000 blocks until the reward drops to zero. 

Bitcoin can be used to purchase real-world items as well as services through any merchant that accepts this form of cryptocurrency as payment. Other than mining, you can invest fiat currency and exchange it for BTC at a recommended broker or exchange platform.

3 Key Selling Points of Bitcoin (BTC)

1

No Risk of Third-Party Seizure

Bitcoins cannot be seized because there are multiple redundant copies of the Bitcoins transactions database. Basically, governments cannot freeze the wealth of individuals or businesses. Users have absolute freedom to do anything that they want with their money.

2

More Acceptance of Bitcoin Currency as a Form of Payment

Now more than ever Bitcoin is being accepted as a form of payment for real world goods. Many retailers are allowing consumers to pay for goods using this cryptocurrency. For example, the company Coca -Cola™ has launched vending machines that accept Bitcoins as payments. Bitcoin has also been accepted by multiple healthcare organizations and over 40% of small to midsized business throughout Europe and the US.

3

Your Bitcoins Cannot Be Stolen

A Bitcoin users’ ownership address or public key can only be changed by the owner. Theft of Bitcoins is only possible if someone has possession of a person's computer as well as their private key. This ensures that your money is far more secure when compared to the rates at which fiat currency is stolen.

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Is Bitcoin Worth the Investment?

The cryptocurrency Bitcoin is gaining considerable traction in today's markets. With online transactions becoming the norm, more and more people are beginning to discover the attractiveness of using a virtual currency. With Bitcoin, transaction costs are extremely low and because it uses a peer to peer system, payments are instantaneous. Bitcoin is becoming more and more reliable and reputable. 

Many people believe that digital currency is the way of the future. Bitcoin may not be backed by any central banks or governments, but it can still be exchanged for traditional fiat currencies. What is often a key selling point is that BTC has a healthy exchange rate to the dollar. This is inspiring people to find out more about it and some are even taking steps to begin their cryptocurrency journey. Many people have had success in the past, in fact, some have become extremely wealthy after buying Bitcoin

As with any investment, it is important that you only put in as much as you can afford to lose. Bitcoin is known for its volatility as is the case with many other cryptocurrencies, so it is important to do your research before investing in BTC. Bitcoin continues to have a strong market influence and has a positive outlook for growth in the foreseeable future.

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Frequently Asked Questions

  1. Yes, Bitcoin is a legitimate currency. Many individuals and businesses are utilizing this form of currency to buy goods and make payments online.
  2. No. Bitcoin payments are simpler and faster to make than traditional payment methods. Payments would be made from your wallet application, phone or computer. You could also make payments using a QR code or by placing two NFC enabled devices against each other.
  3. There are numerous advantages associated with the digital currency. You will have the freedom to pay anyone anywhere in the world at any time with a currency that isn’t controlled by a centralised authority.
  4. Yes, BTC is trustworthy. This is in part due to it being a fully decentralized system. All transactions are completely transparent on the network, while simultaneously offering a high degree of privacy.
  5. Yes. However, caution is advised; do not expect to get rich quick. With enough effort and research you can learn how to utilize this emerging technology and earn money.
  6. Yes. Bitcoin is considered by many financial experts to be the safest payment system ever conceived.
  7. No. Bitcoin is not a fraudulent scheme. It is an electronic peer to peer payments system that can now also be used as a trading instrument. Thousands of users and businesses currently use BTC every day.
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