Crypto Club Site Logo

What is Bitcoin?

Facebook
Twitter
LinkedIn

Bitcoin (BTC) is the face of cryptocurrencies. Since 2009, it went through a series of reputation issues. First, as a medium of exchange among black markets. Then now, as the fastest growing digital currency there is. It started out selling for $150 a coin. But it grew to over $30,000 in only around 10 years or so. And so many countries are adopting it as its main currency – the Central African Republic and El Salvador are examples.

One thing to note about it too is how its supply has a cap. That means it runs on scarcity, which ensures that its price won’t fall so hard if an influx of coins starts coming out. To this day, there are over 19 million Bitcoins that circulate. And anyone could be part of the 21 million club, especially if they invest now. 

As the bear market continues, many look at it from different perspectives. Some take it as an evidence to not get into cryptocurrencies and not hold Bitcoin. But some, especially those called “whales” in space, take it as a sign to take more. Either way, this proves how Bitcoin once grew out of its shell and made the whole world interested about it. 

But there are more things to know about it. It’s not enough that you know what it is or how much is in circulation. Rather, you need to know how it works and why people treat it the way that Bitcoin has value today. 

Who created Bitcoin?

Now, you might be wondering, who created Bitcoin? The technology that rose to be a challenger to the current financial system should come from someone’s idea, right? Well, it’s Satoshi Nakamoto. But you can’t search this name up and get a sure answer on who they are. That’s because Satoshi Nakamoto is only a disguised name for the person or group who made Bitcoin. It was the name that investigators found to be the author of a study about Bitcoin. Other than that, we still don’t know any more information about who Satoshi Nakamoto is.

But there are some guesses about who Nakamoto was today. There’s Len Sassaman who made an article about the Bitcoin network. A lot of analysts say that he fits the Nakamoto figure because of his expertise in cryptography. He also committed suicide when Satoshi Nakamoto’s name got filth for having Bitcoin be the medium of drug transactions.

Then of course, there’s Hal Finney. He was the first ever person who received Bitcoin from Nakamoto. Investigators say he might be also the one who sent the first Bitcoin and only played out as the recipient. More than that, he was very passionate about Bitcoin’s potential back then. But still, he ended up having health problems with ALS when Satoshi’s name became dark, too.

Sticking to the Satoshi label seems wiser than relying on what were only investigations up to today. But there’s no denying how smart the person was for making the largest and highest-ranked cryptocurrency today. Not only that, Satoshi was also the first person to make a database for Bitcoin or the Bitcoin Network.

Understanding Bitcoin

Bitcoin is more than a digital currency that many people transact so it gained value. It spearheaded so many altcoins (cryptocurrencies aside from Bitcoin) to rise and present utility on their own. But to go back to Satoshi’s case for creating Bitcoin, he described the need for an electronic payment system. And that system should be done with great security. So, there’s the cryptographic proof instead of pure trust.

Picture it this way: You go to the bank and put all your money there. But you don’t question how they make sure your money is safe with them. It’s a product of society to trust banks and other financial institutions because ever since, people trusted them. Though today you can know how a bank works, that wasn’t the case before. And Bitcoin, the first cryptocurrency, challenged this value of “trust” given to financial institutions.

After the 2008 Financial Crisis, Satoshi thought and executed Bitcoin a year afterwards. The decentralization aspect of the said coin is what makes it different. In essence, people can transact with a tighter security in place. There’s the public ledger, also known as blockchain technology, that shows the transactions done. But the users remain anonymous, for their safety. More so, there is no government or state that rules how Bitcoin works. There’s a fixed supply of 21 million Bitcoins, so the value doesn’t drop in relation to its supply. 

One of the main criticisms about it is the value that people attach to it. But if you look at how it works in other settings, people also thought the gold was valuable. And that’s because they attached that much value to it. So, the main difference of Bitcoin is not where you can find it – it’s not because it’s digital. But because it proposes a challenge to the current financial system we have.

Bitcoin’s Blockchain Technology

Before we take a look at Bitcoin’s blockchain technology, let’s first define what a blockchain is. In its simplest terms, a blockchain is a public ledger. It stores all of the transactions involving a cryptocurrency for public viewing. And if you don’t own a cryptocurrency that the blockchain covers for, you can’t see it. So, there’s a sense of community that comes with blockchains.

Whenever you send cryptocurrencies, you create a transaction. Now, since blockchains are decentralized, there are people who verify it. For now, let’s refer to them as miners, which is next to the discussion. So, if the transaction is true and verified, it creates a hash. 

The hash is a code that only you hold and remember by putting words you always know. This also helps make the transaction unique and prevent fakers. There are also some notes in the transaction, which contains a math algorithm called “blocks”. Now, combine the hash and the block together and you create a chain with links. This is also unique and the links are irreplaceable. So, even if the community sees the transaction, they can’t copy or fake it.

Now let’s go back to the Bitcoin blockchain technology. It only means that there’s a blockchain for all Bitcoin transactions among Bitcoin holders. This blockchain technology allows for a smooth and secure channel for people to act with regards to their Bitcoins.

If you look at it, you get better security measures with a blockchain than any other technology. For one, it records with uniqueness on every item.  Second, there’s the level of transparency in all transactions. And third, the balance of what stays private and what goes out to the public is present. For the block to be legitimate, miners and holders need to verify it. There’s an encryption pattern and links on the chain that make it so secure. And today, many countries and institutions are planning on extending the use of blockchain technology to other matters like voting, education, etc.

How to Mine Bitcoin

Let’s say you want to earn Bitcoin but can’t do it out of buying. Well, you can see that in real life where you want to earn money but can’t do it by asking for it only. So, you work. The same thing applies to getting Bitcoin – you work. But in the space’s context, you don’t only “work”, you mine. 

Bitcoin runs on a decentralized system. That means that it needs a decentralized workforce to keep it running. In this case, miners are what you call the workforce. They help keep the Bitcoin infrastructure running in two ways: creating or keeping new Bitcoins and verifying transactions. 

If you’re wondering how they continue doing it, well, they also receive salaries. But these are in the form of Bitcoins, too. They can put it in transfer fees or “taxes” in every Bitcoin transaction they do. But, let’s talk more about the process of mining Bitcoin.

Since the system runs on decentralization, it means you can mine as many as you want. But it involves two things: credibility and skill. On credibility, transactions would want someone whom they know can mine or verify without any problems. Because if the miner fails to verify it, the transaction will fail. So, the X number of BTC won’t transfer through to the recipient. 

But again, what does the verification process look like? This is where skill comes into the picture. The miner needs to solve some math algorithm problem to verify the transaction. To further explain it, the miner takes the transactions and bundles them up. You call this a “block”. The bundling is the math problem. The transactions are indifferent shapes and you need to piece them out together which requires you to do a bit of math only. If it succeeds, then the blockchain lets you know the transaction pulled through. So, is it hard? It’s not. But does it require a lot of computer power? Yes, it does. The “bundling” effect requires your energy source to be reliable as a miner.

If you see a photo of a person running multiple PC devices or computers, that’s because they want to earn double or triple the amount they can verify. The more devices you have, the more Bitcoins you get to earn as a miner. And the more you verify, the more you create credibility. Now, the question is: how do you get your first few transactions to verify?

You’re late to the mining party, but that doesn’t mean you can’t participate in it anymore. New miners can use their strategies to win people over. But if you can’t do that, you can join a mining pool. As the name suggests, it’s a group of miners who provide services as a team rather than as an individual. So, those with more credibility come up to the users and recommend those who are new to mining to work on their transactions. They do this until the miner can leave the pool and start earning full for themselves.

How to Buy Bitcoin

The best way to buy Bitcoin is through cryptocurrency exchanges. But let’s talk about the ways you can start investing in it with fiat currency in your hand. If you’re not yet familiar with the terms, fiat currency is the government-issued currency we have. An example would be US Dollars (USD). Now, you can use that to get yourself some Bitcoin.

But in all ways and steps, you must have a crypto wallet. It’s a special wallet that only works for cryptocurrencies. You can have a wallet from a website or a wallet in your device or physical ledger. Out of the three, we recommend having your own physical ledger which looks like a USB cable. The reason is because so many websites perform rug-pull or take out cryptocurrencies from their users’ wallets and leave them in thin air. If you can be responsible enough, and you should be, then go for a hard or physical ledger. 

Now, here are the ways to get Bitcoin using your fiat money:

  1. If your government allows you to convert your currency to BItcoin (BTC) through them, then this is your best bet. 
  2. Go to physical exchanges that accept your cryptocurrency in exchange for Bitcoin (BTC). 
  3. Use e-wallets that offer cryptocurrency services. They’re faster and work well within your fiat balance. Be wary of their conversion rates, though.
  4. Use crypto wallets that allow you to link your traditional bank and convert your balance to Bitcoin (BTC). 

Now, let’s talk about cryptocurrency exchanges. There are a lot of them, but we advise you to do your own research about each option you have. Because not only will this help you prevent scams. But it will also help you see which one best fits your interests. This is to say that some cryptocurrency exchanges work well with others, but some don’t.

Crypto exchanges are places where people trade their cryptocurrencies. That means you don’t buy from a store. Instead, you buy from another person. Blockchain technology works well with securing transactions, so this works fine for all users. But you also need to have a Bitcoin-accepting wallet to make sure that what you receive is Bitcoin, not any other cryptocurrency.

Now, let’s say you can’t afford a whole Bitcoin. You don’t have to worry because you can buy fractions of a Bitcoin. Users call them sats, from the word “Satoshi”. So, you can stack up on your stats until you get your first, whole Bitcoin. 

How Is Bitcoin Used?

There are so many ways you can use Bitcoin (BTC). Since it’s undergoing major global adoption, BItcoin allows you to buy things you never thought the digital currency could buy. In fact, major companies like Microsoft and Whole Foods accept Bitcoin today. But if we’re talking about national adoption, you can go to El Salvador to live off using Bitcoin only. 

You can also hold it and make it an investment. Let’s say you’re holding it until it grows in price value to buy something. Or you want to hold it to be part of your savings. These scenarios are what whales in the crypto space, or even financial experts do. They don’t only pay or transact with Bitcoin. Instead, they also want to accumulate it.

If we’re talking about the benefits of using Bitcoin, there’s a lot. First, you won’t ever need a physical wallet with you. You only have to get your phone and make the transaction from your crypto or Bitcoin wallet. Second, it’s faster. If you’re paying online, transactions could add a layer of frustration to your purchase. The good thing is Bitcoin can transact in seconds.

Risks of Investing in Bitcoin

As with anything, there are risks. Bitcoin is not safe from that. But it’s also important to know how much these risks can affect you holding the currency. For many people, Bitcoin is not an investment. It’s because you’re betting on the same currency which the government doesn’t back or doesn’t have value on its own. But there are other risks, such as the following:

  • Limited knowledge about Bitcoin. It’s great you’ve come this far in learning about Bitcoin. But truth be told, so many people who hold it don’t even know how it works. With that, they’re more prone to scams. Or if something changes in the market, they might feel demotivated in a short amount of time.
  • Volatility. While Bitcoin is not as volatile as other cryptocurrencies, it’s still volatile. It can go up or down in no time, even in seconds! And if you don’t know when to get more or take out, then it could be a problem with investing in Bitcoin
  • No regulation. Since Bitcoin runs on a decentralized system, there’s no government to back anyone up. So, holders of and investors in the coin should always know better. If you face a scam, it might be harder to retrieve it back than with fiat currency.

There’s enough reason to see Bitcoin as a legitimate investment. But the barriers to entry aside from the price is quite high. So, take your time to learn more about it first before starting to invest. You are never late in the 21 million club, especially if you know how it works for the great few.

Regulating Bitcoin

Regulating Bitcoin is not as easy as you think. It started in 2009 and kept growing since then. But it still lies in a gray area when it comes to its regulation. There are many reasons why, and it should make you think whether regulating it would be for the better or worse.

First, it’s decentralized. That means everyone participates for it to work. It doesn’t only depend on your trust in a centralized system. It’s even the opposite of it. The people who are in the community continue to learn more about it, and are more conscious about their Bitcoin. If the government were to regulate it, then it could pose threats to Bitcoin’s status. It could mean many things, but for the most part governments might mess with its supply. That means an influx of Bitcoins from 21 million to who knows how many. 

Another thing is adoption. Unless all businesses, no matter how small or big, participate in accepting it, then regulation could go forward. But it looks like Bitcoin is still a polarizing issue among people. Props to the countries that adopted it as its legal tender. Still, the threats of volatility pose problems for the state to adopt it. 

So yes, determining Bitcoin regulations could take longer than expected. But one thing’s for sure: many countries are starting to take more interest in it. Now that the world runs more in the digital space than ever, the need for cryptocurrencies like Bitcoin starts to grow.

The Bottom Line

So, should you get Bitcoin? You definitely should! You might not believe it, but Bitcoin still has so much potential to fulfill. It grew so fast and got so many people on board. But this is not the whole of it. So, either you go get some today and celebrate with the community as it grows or miss out on the future’s currency.

Bitcoin FAQs

What is Bitcoin?

Bitcoin is a cryptocurrency that allows people to transact it as digital money to purchase goods and services. Contrary to fiat money, there is no central figure that dictates the supply of Bitcoin.

Who created Bitcoin?

Satoshi Nakamoto, an alias at best, is the one who conceived the idea of Bitcoin. In simpler terms, it’s the easing of payment methods through cryptography. Then the community who also took interest in it followed through in developing the coin.

How does Bitcoin work?

Bitcoin works like any other currency, but digital. But something that makes it different is that it runs on a public ledger called blockchain technology. This technology allows for irreplaceable transaction receipts that keep users safe and promote efficiency in transacting.

How difficult is it to make a Bitcoin payment?

It’s easier than paying with fiat money. You only have to prepare your crypto or Bitcoin wallet and direct the payment to another wallet.

What are the advantages of Bitcoin?

Aside from it being the next big thing, there are so many intrinsic benefits to using Bitcoin. There’s the freedom to transact, better security with blockchain, and transparency among many other benefits.

More to explore

They Believe in Us

We suggest

Table of Contents