An Introduction: What is Bitcoin?

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  • Published At: 09.02.19 19:22
  • Last Updated At: 21.11.19 21:02
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What is Bitcoin?

Bitcoin (BTC) - History

Since the Wall Street Crash of 1929, people have been looking for a way to create an ultimate currency, a means to transfer money on a peer to peer network. The efforts to pursue such a development strengthened in the aftermath of the 2008 financial crisis. Thus, in the same year, the dream finally came true when Satoshi Nakamoto presented Bitcoin to the world for the first time.

 

Nakamoto published a white paper on cryptography and it also described a global digital currency. The first title was “Bitcoin: A Peer-to-Peer Electronic Cash System.” In the early stages of the development, everyone was skeptical, but the few observant ones who invested in the digital currency back then are now as rich as one desires to be. Though, the story of Bitcoin is more than just a rags-to-riches tale; it’s a movement cored around the decentralization of wealth.

 

In 2009, Satoshi Nakamoto launched the first software and the first ever “Bitcoin cryptocurrency.” On January 2009, version 0.1 of Bitcoin software was released.

 

What Is Bitcoin?

Bitcoin is, essentially, a combination of five things:

·       Bitcoin-the-network (all participants running bitcoin nodes, verifying, validating and relaying transactions and mining and relaying blocks)

·       Bitcoin-the-protocol (the universal rules that define if transactions and blocks are valid or not and which should be followed to be able to participate)

·       Bitcoin-the-currency (a code that represents ownership of a digital concept)

·       Bitcoin-the-ledger (the history of all transactions ever made on the network, all nodes have a copy to be able to autonomically validate new transactions)

·       Bitcoin-the-software (Software clients that run the protocol to update their ledger and to interact with the network to send or receive the bitcoin currency )

Combined, these five are “Bitcoin”. As mentioned above, Bitcoin is the first of its kind: the first-ever cryptocurrency.

 

The system is designed to let peers pass the currency without going through any type of central “authority,” like banks or payment gateways. This way, both peers get the maximum out of their currency exchanges since everything is done and held electronically.

 

It shares the values of traditional currencies, but its verification is based on a global consensus within the protocol. Its most important trait is decentralization, meaning that no single institution (or government) can control the network.

 

In order to obtain one, an individual has to either purchase one online, or “mine” one. Mining is a process that requires computing power; it is based on the processing power of the computers used by the miner. It is a process that uses a user’s computing power to solve mathematical problems, and in return, awards the user with bitcoin. It is a great incentive for people to “become miners” and a smart way of issuing currency.

Bitcoin Mining

 

With Bitcoin, the world was able to leverage miners in order to create a digital currency that was able to tackle the “double spending” problem. The distribution is controlled and maintained by an open network; in other words, no-one owns the Bitcoin network and the flow of funds.

 

All the miners are collectively verifying transactions; the transactions approved by the entire network are considered legitimate as there is a global consensus. All approved transactions are placed in a block. Put in simpler words, the blockchain aspect of Bitcoin exists to ensure no one is able to transfer the same BTC more than 1 time. Once the system recognizes it has been passed on to some one else, any additional movement is a double spend. Miners exist to ensure double spends never happen. In return, they are awarded; the amount of Bitcoin awarded changes since, every few years, the network halves the reward. At present, the Bitcoin reward is 12.5 BTC per block.

 

 

Where to Buy Bitcoin?

The best way to buy bitcoins is on verified online markets. These cryptocurrency exchanges exist to enable trade and investment. The vat portion of them offer the same service but a few stand out:

·       Coinbase – the biggest and probably the most respected cryptocurrency platform in the US.

·       IndaCoin –Instantly Buy Bitcoin using a Credit Card

·       Robinhood – fee-free purchase of digital currencies.

·       Binance – the largest exchange by volume.

 

Buy BTC

Bitcoin can be bought on fiat exchanges and purely crypto-crypto exchanges. Fiat exchanges allow purchases with traditional money like USD, GBP, JPY, etc., but crypto-crypto exchanges, like Binance, only allow the trade of cryptocurrency against other cryptocurrencies.

Note: If buying bitcoin with fiat, credit cards are the least efficient way. Instead, wait a few days for the wire transfers without having to pay any more fees.

 

While there are numerous places to buy Bitcoin, timing the entry is challenging. Predicting the growth of Bitcoin is done via a complete and thorough analysis. This is called a prediction or a crypto signal. They are based on multiple factors:

·       Technical analysis

·       Latest news

·       Rumors about cryptocurrencies

·       Stock changes

·       Market situation (supply and demand)

 

Not all signals are trustworthy, so be extremely careful with whom you trust. Our experts advise you to find trustworthy traders and buy from them ONLY, to avoid potential scams. At the same time, they will provide you with the much-needed market analysis and maybe even a crypto trading signal as a sign of good faith.

                                                          

Common Bitcoin Misconceptions

Just like with everything else in the world, there are a few misconceptions about Bitcoin. The most common ones are below:

 

·       It cannot be stolen – Even though people believe that bitcoin cannot be stolen, it can. 

There are many websites that are trying to scam users by trying to sell them “cheap bitcoins” or offering to buy their bitcoins at “abnormally high prices.” Once the users hand over their bitcoins, the digital trace is gone within minutes. Fact: over 20 percent of all bitcoins are considered to be lost (currently valued at over $15 billion).

·       Bitcoin is a Golden Coin – Many people think of a bitcoin as a golden token or a coin with a “B” letter on it. In reality, the coin/token is a worthless coin and nothing more than a symbol, much like a simple souvenir or memorabilia.

·       You Need/Have to Buy an Entire Bitcoin – In order to buy a whole Bitcoin, you have to spend a small fortune, value in thousands of dollars. This is another common misconception by the majority of people around the world. The truth is that in order to become a bitcoin holdes, you can buy as little as 1/100 million of it, this amount is termed as a “Satoshi.” Bitcoins are divisible to eight decimal places, allowing you to purchase an abysmally small amount.

·       Bitcoin has no “Internal” Value – As long as there are millions of people around the world believing that Bitcoin offers a cheaper and better way of keeping and transferring the currency, Bitcoin will continue to have intrinsic value. The money supply is finite and in order for the transaction to happen, people must own Bitcoin units. Therefore, Bitcoin has value.

·       Bitcoin Growth cannot be Predicted – Just like every other currency on the stock market, it can be “monitored and analyzed.” Using bitcoin signals, analysts and traders are able to determine the slightest changes at best. In simple words, a “very close guess” or an educated prediction.

·       Bitcoin has no future! – When the Internet first surfaced, people said the same thing. It is the fear of the unknown that pushes people back to their safety cradles. However, just like the internet, the future of Bitcoin is vast and well-supported.

·       Bitcoin can disappear – Another fear most investors have is that Bitcoin can disappear as a currency. The only way for it to be shut down would be to make the Internet disappear. As no one owns the network, there is no means to simply walk away with all Bitcoin in existence or the technology that supports it.

 

Bitcoin in a Nutshell

Bitcoin is composed of a currency and a blockchain, which serves as the network that supports the currency. Blockchains are a lengthy concept to be discussed at a later time, but the point to grasp at this stage is that blockchains provide a means to transfer digital assets without giving way for a double spend attack. One a person transfers Bitcoin to someone else, the coin has moved onwards to a new holder and the only means to double spend it would be to take control of the entire Bitcoin network.

 

As there is no central authority in charge of the network, taking control of it would require an attack to acquire more computing power than 51% of the network. Thus, people who secure the network by adding their hash power to it are rewarded with Bitcoin every 10 minutes; this is the time period needed to create a new block composed of the transactions that took place in that timeline.

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