What You Should Know About Bitcoin
What You Should Know About Bitcoin
What You Should Know About Bitcoin: Bitcoin is the world’s first and most valuable digital currency; it was created in 2008 and came into use in 2009. It is open-source software that is not under the control of any central bank or government. The technology behind bitcoin and other cryptocurrencies is called Blockchain technology. Blockchain involves a public ledger that records and verifies transactions that occur in a network of computers. These transactions are verified through cryptography hence the generic name cryptocurrency.
Common Facts about Bitcoin
– There is no central issuing or controlling figure over bitcoin; it is open to all.
– It was created by the pseudonymous Satoshi Nakamoto. The identity of the person or group of people called Satoshi Nakamoto cannot be verified.
– There are limited Bitcoins in circulation. At the moment, there is an estimated 18 million bitcoins in circulation. It is expected that the number of bitcoins in circulation would not exceed 21 million.
– The first commercial transaction using bitcoin occurred on 22 May 2010. Laszlo Hanyecz bought two pizzas in Jacksonville, Florida for 10,000 BTC.
– It is estimated that the last bitcoin will be mined in 2140.
How to Own Bitcoins
- Bitcoin Mining: This is the process by which new bitcoins enter into circulation. The procedure of mining is responsible for the various transactions recorded on the ledger database. It involves the use of high-powered machines which work at higher speeds than supercomputers. During analysis, we learn that bitcoin miners use more electricity than all of Google.
What happens during the process of mining? Miners are given complex mathematical problems to solve; these problems make up the blocks of transactions. When the miners solve these mathematical problems, it leads to the production of new bitcoins.
When transactions occur using bitcoins, these transactions are lumped together into blocks and added to the blockchain. These blocks of transactions are recorded in the ledger of the network nodes. It is the job of a bitcoin miner to verify the accuracy of these transactions to avoid double-spending of bitcoins. Bitcoins are given as rewards to miners when they have successfully confirmed the accuracy of a block of transactions.
The amount of bitcoin in circulation is determined by the activities of miners. After 210,000 blocks (roughly four years), the block reward is halved. In 2009, the block reward was 50. By 2013, it was cut to 25. By 2018, it was halved to 12.5. In May 2020, the block reward was reduced to 6.25.
- Buying Bitcoin: The other means of owning bitcoin is by buying it. People who invest in bitcoin do so by buying it. Here are some of the things to note when buying bitcoin or any other cryptocurrency.
- Choose a Broker: Just like with stock investments, you need to register with a broker or crypto exchange. A cryptocurrency exchange is a platform that brings buyers and sellers of cryptocurrencies together. There are thousands of crypto brokers in the world, with each catering to the needs of a particular community.
Before you choose a broker, you should look out for the following features
– A user-friendly interface, the trading interface of a common trading platform will be complex for a beginner. However, some exchanges make efforts to simplify the options on the platform for beginners.
– Any broker that does not offer two-factor authentication is lax about security. Ensure that the broker puts extra security measures in place before you register with them.
2. Create an Account: When you decide on the broker you choose, sign up with the broker. During the signup process, you have to verify your identity. The verification process may require you to submit your driver’s license or passport. It is dependent on the country you are registering from. After creating an account, you have to
3. Fund the account: You can fund your account with your credit card or via bank transfer. Different countries have regulations on how people can fund their bitcoin wallets. There are also perks such as transaction fees. Apart from the crypto exchanges charging transaction fees, some credit card companies may charge for crypto transactions.
4. Place Order: When you have funded your account, you should order the number of bitcoins you want.
Cold vs. Hot Wallet
When you buy bitcoins on a broker, it is stored on a wallet provided by the broker. You can also move the bitcoin to safer storage; these storage are known as hot and cold wallets.
Cold Wallet: These are wallets that are not connected to the internet; they could be your Hard disk drive or your USB drive. If there is damage to your storage device, it becomes impossible for you to retrieve the bitcoins back.
Hot Wallet: These are wallets connected to the internet. They are at higher risk of theft than cold wallets.
Investing in bitcoins as well as other cryptocurrencies can be tricky. Bitcoin, however, is more predictable than other cryptocurrencies. This article aims to provide adequate information before you invest in bitcoin.