BUZ INVESTORS Bitcoin Basics “Now what the heck is Bitcoin?” asked my cousin, bustling into the coffee shop where I sat sipping on my coffee. I’ll put it mildly; my cousin is not the savviest of people. Answering that question meant

Bitcoin Basics: Everything You Need to Know About the Digital Currency

Bitcoin Basics Explained for New Investors

BUZ INVESTORS Bitcoin Basics “Now what the heck is Bitcoin?” asked my cousin, bustling into the coffee shop where I sat sipping on my coffee. I’ll put it mildly; my cousin is not the savviest of people. Answering that question meant

BUZ INVESTORS  Bitcoin Basics “Now what the heck is Bitcoin?” asked my cousin, bustling into the coffee shop where I sat sipping on my coffee. I’ll put it mildly; my cousin is not the savviest of people. Answering that question meant I had to start from the beginning—from the Bitcoin basics.

BITCOIN BUZZWORD

Adam heard (what he calls) the “buzzword” from a bunch of coworkers who invested in Bitcoin and were making wild Bitcoin price predictions for 2017

So what really is it and why are so many going crazy about it? Sadly, Google wasn’t much help to Adam—it’s all gobbledygook for newbie Bitcoin investors. So, I’m making a Bitcoin guide for him that might come in handy for you, as well.



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Bitcoin Basics

Why Bitcoin?

Satoshi Nakamoto faced a dilemma in 2016. If he wanted to transact money, he roughly had two options. First, he could buy and sell using cash, which could exchange hands without him divulging any information about himself. But cash had a downside of safekeeping. Large sums were difficult to carry around and ran the risk of getting stolen.

The other options encompassed checks and electronic transactions via credit cards, which were safer to carry but compromised personal information. Nakamoto didn’t like the government or banks surveilling his life.

What Is Bitcoin?

Two words; electronic money!

Satoshi Nakamoto—the enigmatic founder of Bitcoin—wrote a computer code that generated complex mathematical equations. These mathematical equations, when solved, give the solver the rights to pass on ownership of a virtual currency—Bitcoin.

Now, Nakamoto was the first person to solve some equations and get hold of a few bitcoins. He then found enough people who believed in his idea to start transacting in bitcoins.

So, Who Creates Bitcoin?

Nobody! That’s the whole idea of Bitcoin. It is decentralized—which means no central authority or individual controls it. That’s the fundamental concept in bitcoin basics that you need to wrap your head around.

Satoshi Nakamoto programmed the computer code in such a way that only a certain number of bitcoins get unlocked every two years and will do so for the next 150 years. Yes, 2140 is the cut-off year. By then, a total of 21 million bitcoins will be in circulation. That’s it! No more bitcoins after that.

What Is Bitcoin Mining?

To put it simply; mining means solving Nakamoto’s mathematical equations.

You know by now that only a certain sum of the 21 million bitcoins becomes available every two years. But the bitcoins are locked in computer code, so to say. To unlock them, someone has to do the complex math.

The equations put out by Nakamoto’s code are like puzzles. Nakamoto was the first one to solve some and get access to the first bitcoins. The equations are open to all computer geeks out there. Anyone can solve them to “mine” or unlock the bitcoins.

I’m No Computer Geek, Do I Have to Mine Bitcoins?

No, you don’t! Mining is for Bitcoin enthusiasts or for those looking to make money out of it by mining and selling their rewards. If you want to get hold of bitcoins, you can do one of the following

Okay, But How Does Bitcoin Work?

It’s easy! All you need is a smartphone or a computer with Internet access and you’re set.

The first thing you need to do is download a Bitcoin wallet. That’s where you’ll be keeping all your bitcoins. You can find some of the popular e-wallet apps on the Bitcoin website: (Source: “Choose your Bitcoin wallet,” Bitcoin, last accessed April 13, 2017.)

Once you have the wallet, the next step is to get your public key or address. This is your identification. The app lets you send a request for the address. You’ll receive back a lengthy alphanumeric code. This is the address you give to other bitcoiners when sending or receiving bitcoins.

Where Can I Buy Bitcoin?

If you have nobody to send or lend you your first bitcoins, you can go buy them. Where? On a Bitcoin exchange. That’s where bitcoins are traded for real currency.

You can create an account on a Bitcoin exchange and link it up with your bank. Once the bitcoins you’ve bought get deposited into your account with the exchange, you can then transfer them to your bitcoin wallet.

The price of a bitcoin is set by market forces of demand and supply, and is currently hovering over $1200 for one bitcoin. The unit of bitcoin is expressed as BTC.

Is Bitcoin a Legal Currency?

Yes, absolutely! At least in the U.S. and most of the other countries, it is.

In fact, Bangladesh, Bolivia, and Ecuador are the only countries in the world where Bitcoin is outrightly banned All other countries are either mum on its use or have explicitly allowed it.

Should I Invest in Bitcoin?

So I believe Adam finally understands the bitcoin basics and so do you. Now comes the final question; should one invest in this digital currency?

It depends on your risk appetite.

If you look at its penetration into the mainstream, you can easily tell that the currency is still in its infancy. But if you look at its adoption rate, the growth is vivid.

From a market valuation of a few cents to a billion dollars in just three years—that kind of growth is unprecedented in history. Neither Apple Inc (NASDAQ:AAPL), nor Alphabet Inc (NASDAQ:GOOGL), nor Amazon.com, Inc. (NASDAQ:AMZN) have matched up to that growth.

 

 

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