BITCOIN EXPLAINED – A Detailed Guide

Detailed Guide Whats is BItcoin and the History of Bitcoin - Satoshi Nakamoto

Bitcoin is the first cryptocurrency created by Satoshi Nakamoto back in 2009. Nakamoto released a White Paper where he explained why Bitcoin is created and how it works.

After launching Bitcoin, he mined for ten days 1 million Bitcoins, which makes him now the richest man in the world. It is not known yet whether Nakamoto is an individual or a group of people who came up with the idea of creating Bitcoin. He and another developer Martti Malmi registered a new domain, bitcoin.org. Then, Nakamoto released a document, called a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System,” which marks the beginning of the cryptocurrency era.

Understanding Bitcoin

Bitcoin is a virtual currency or often called a digital currency that uses peer-to-peer technology to operate with no central authority or banks. Bitcoin offers lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies.

Transactions are verified by network nodes through cryptography and recorded in public distributed ledger called a Blockchain.
Bitcoin.org describes Bitcoin as “an innovative payment network and a new kind of money.
So, Bitcoin can be used to purchase things, but the whole fuss about it is how to make profits trading it. International payments also can be made with Bitcoin, which is much easier than using the traditional way since bitcoins are not tied to any country or subject to regulation.

How does blockchain work?

The bitcoin blockchain is part of the technology that has revolutionized the system of payments. From the word blockchain, we can understand that it is a chain of blocks that runs on nodes connected by cryptographic processes. Each transaction from the beginning of Bitcoin and Blockchain is stored on the chain and its public. Yet the transaction and the owners of Bitcoin are anonyms.

It is mentioned in the paper from Satoshi that the double-spending problem was the biggest challenge. For example, how someone with 1BTC that has paid already could purchase again and again even though he doesn’t own any Bitcoin anymore.

The double-spending problem was fixed by FULL NODES. This means every node in the blockchain that contains billions has to verify the right amount transferring from a user to another user.
The blocks are connected, and most of them have to accept for the transaction to be successful. For the miners to be rewarded a system of bitcoin mining has been created. This means that CPU’s and other software that validate transaction get a reward. The blockchain and Bitcoin system has been designed to be decentralized and not to have any central authorization like banks. This was done successfully, and now Bitcoin is adopting more than ever.

How to buy Bitcoin?

The easiest way to buy Bitcoin is through a cryptocurrency exchange. There are many exchanges out there, but the most popular ones are Coinbase, Binance, Bitstamp and Bitfinex. The process of buying Bitcoin is simple, just by creating an account in one of the exchanges and using a credit card, which means, therefore, using regular currency.

People buy bitcoins for different reasons, but most people buy them as an investment, hoping that they’ll go up in value. People can send bitcoins to each other using mobile apps or their computers, similar to sending cash digitally.

How to sell Bitcoin?

Cryptocurrency exchanges allow selling Bitcoin also. Depending on the type of holder you are; small investor, institutional holder or trader, you will get to choose the exchange also. There are platforms such as GDAX or Gemini that work only with large orders from institutional investors and traders. But the exchanges that were mentioned above for buying Bitcoin can be used to sell them.

Where to store Bitcoin?

Bitcoin is stored in “digital wallets” or physical wallets like Ledger Nano. Digital wallets are like virtual banks where users can send or receive bitcoins, pay for anything they decide to buy using bitcoin, or save their bitcoins, wait for the value to go up, and sell them. Also tied to your wallet address is one or more private keys. They, as the name suggests, should not be shared with anyone. Keys are used to verifying the public key, and to sign off on transactions.

THINGS TO KNOW ABOUT BITCOIN WALLET

  • BITCOIN IS SECURE ON YOUR WALLET
  • UNCONFIRMED TRANSACTION ARE NOT SAFE
  • TRANSACTION ARE PUBLIC THROUGH BLOCKCHAIN EXPLORER
  • BITCOIN IS NON REVERSIBLE but REFUNDABLE

Bitcoin mining

Mining is how Bitcoin is produced. There are mining farms all around the world. Mining is costly, mostly since it spends so much energy. Some people buy the mining equipment and mine Bitcoin in their houses. Another way to mine bitcoin is cloud mining which is done through online software. This actually is the preferred way to most of the people since it is much simpler and affordable. Miners solve complex mathematical problems and get rewarded with bitcoin for doing so.

Volatility of Bitcoin

The term “volatility” is used often when it comes to Bitcoin since the price of it goes up and down frequently. This actually is what makes Bitcoin so special and attractive because traders have seen big earning potentials because of the price movements. For its first few years, the price of Bitcoin remained for a few dollars. Then in 2017, it hit its all-time high of $20,000. Later, due to the coronavirus pandemic, Bitcoin dropped to $3,750. The price of Bitcoin keeps moving up and down, and that’s what makes it exciting.

The future of Bitcoin

Many were skeptical about Bitcoin when it got released in 2009. They even called it a bubble or considered it a scam. But Bitcoin proved them wrong. From a few dollars in its beginning, Bitcoin price reached $20,000 in 2017, and at the time of writing, the price stands at $11,737. It is hard to predict the price of Bitcoin, but many are optimistic, saying that it could reach $40,000 by the end of 2021. Nobody knows precisely how much will the price of Bitcoin go. 

Anyways the future outlook for bitcoin is the subject of much debate. No one knows what will happen with Bitcoin. Some countries like Japan, China, and Australia have begun weighing regulations. Governments are concerned about taxation and their lack of control over the currency.  Crypto enthusiast believes that the more financial institutions use it, the more promising the future of Bitcoin will be.

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